2019/2020– 2021/2022 Final Annual Budget and Medium

2019/2020– 2021/2022 FINAL ANNUAL BUDGET AND MEDIUM -

TERM REVENUE

AND EXPENDITURE FRAMEWORK

(MTREF)

CONTACT INFORMATION

Mr. N DIAMOND Telephone Number: 013 759 2040 MUNICPAL MANAGER Fax Number: 013 759 2274 Email: [email protected]

Mr. W.J KHUMALO Telephone Number: 013 759 9060 CHIEF FINANCIAL OFFICER Fax Number: 013 759 9055 Email:[email protected]

Ms. Z P MALAZA Telephone Number: 013 759 2013 DEPUTY CHIEF FINANCIAL OFFICER Fax Number: 013 759 9055 E-mail: [email protected]

Ms. D N SIBANYONI Telephone Number: 013 759 9143 SENIOR MANAGER – FINANCIAL Fax Number: 013 759 9055 PLANNING AND BUDGETING E-mail:[email protected]

Mr. S F DLAMINI Telephone Number: 013 759 9249 CHIEF ACCOUNTANT – BUDGET AND Fax Number: 013 759 9055 REPORTING Email:[email protected]

Ms. T M KGOTSE Telephone Number: 013 759 2005 SECRETARY – OFFICE OF THE CHIEF Fax Number: 013 759 9055 FINANCIAL OFFICER Email: [email protected]

TABLE OF CONTENTS

PART 1 – ANNUAL BUDGET ...... 6

1.1 MAYOR’S REPORT ...... 6

1.2 COUNCIL RESOLUTIONS ...... 6

1.3 EXECUTIVE SUMMARY ...... 11

1.4 OPERATING REVENUE FRAMEWORK ...... 21

1.5 OPERATING EXPENDITURE FRAMEWORK ...... 25

1.6 CAPITAL EXPENDITURE ...... 31

1.7 ANNUAL BUDGET TABLES - PARENT CITY ...... 45

PART 2 – SUPPORTING DOCUMENTATION ...... 64

2.1 OVERVIEW OF THE ANNUAL BUDGET PROCESS ...... 64

2.2 OVERVIEW OF ALIGNMENT OF ANNUAL BUDGET WITH THE IDP ...... 68

2.3 MEASURABLE PERFORMANCE OBJECTIVES AND INDICATORS ...... 78

2.4 OVERVIEW OF BUDGET RELATED-POLICIES ...... 82

2.5 OVERVIEW OF BUDGET ASSUMPTIONS ...... 96

2.6 OVERVIEW OF BUDGET FUNDING ...... 99

2.7 BUDGET SUPPORTING ABLE………………………………………………………………………………………………………………………….………...104

2.8 LEGISLATION COMPLIANCE STATUS ...... …131

2.9 MUNICIPAL MANAGERS’ QUALITY CERTIFICATION ...... 134

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ABBREVIATIONS, ACRONYMS AND DEFINITIONS

COGTA – Department of Co-operative Governance and Traditional Affairs CPI – Consumer Price Index DORA – Division of Revenue Act

EPWP – Expanded Public Works Programmes

GDP - Gross Domestic Product

GRAP – Generally Recognised Accounting Practices

IDP – Integrated Development Plan.

INEPG – Integrated National Electrification Program Grant

MFMA – Municipal Finance Management Act, 56 of 2003

MIG – Municipal Infrastructure Grant

MPRA – Municipal Property Rates Act, 06 of 2004

MSA – Municipal Systems Act, 32 of 2000

MDTG – Municipal Demarcation Transition Grant

MTREF – Medium-term Revenue and Expenditure Framework

WSIG – Water Services Infrastructure Grant

MWIG – Municipal Water Infrastructure Grant

NDPG – Neighbourhood Development Program Grant

NERSA – National Electricity Regulator of South Africa

NT – National Treasury

PT – Provincial Treasury

PTISG – Public Transport Infrastructure Systems Grant

SDBIP – Service Delivery and Budget Implementation Plan

The Act – Refers to the Municipal Finance Management Act, 56 of 2003

Adjustment Budgets – Prescribed in section 28 of the Municipal Finance Management Act. It is the formal means by which a City may revise its budget during a financial year.

Equitable Share – A general grant paid to municipalities. 2019/2020 – 2021/2022 Approved Final Budget and Medium Term Revenue and Expenditure Framework Page 4

Operational Expenditure – Spending on the day to day expenses of the City such as general expenses, salaries and wages, and repairs and maintenance.

Rates – Local Government tax based on assessed valuation of a property.

Allocations – Money received from Provincial and National Treasury.

Budget – The financial plan of the City for a specific period.

Capital Expenditure – Spending on municipal assets such as property, plant and equipment’s. Any capital expenditure must be reflected as an asset on a City’s balance sheet.

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PART 1 – ANNUAL BUDGET

1.1 MAYOR’S REPORT 2019/2020 MUNICIPAL BUDGET SPEECH BY THE EXECUTIVE MAYOR OF THE CITY OF MBOMBELA, CLLR S.P MATHONSI – 31 MAY 2019

The Honourable Speaker of council, Cllr G.S. Siwela

Honourable Chief Whip of council, Cllr M. Nsimbini

Honourable Party Whips

Honourable Councillors

Honourable Traditional Leaders present

The City Manager

Senior Management of the municipality

Distinguished Guests

Members of the media

Ladies and Gentlemen

Good Day

Honourable Speaker, we appreciate and treasure the opportunity presented to us as the Executive to present our envisaged roadmap for, not only for the next financial year but a roadmap that will see us through the remainder of this five year term of office.

The aftermath of the 2019 National and provincial elections have had a huge bearing on the City of Mbombela. The outcomes of these elections have seen three of the city’s key and experienced members of its council deployed to the Mpumalanga Provincial legislature to continue serving at various portfolios as determined by their political parties. These are former Councillor Mandla Msibi who had served as both Ward Councillor for in the greater Daantjie area of ward 2 as well as the Speaker of this council; Councillor Vusi Mkhatshwa who served as the Member of the Mayoral Committee responsible for the Public Works, Roads &

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Transport portfolio and Councillor Trudie Grove-Morgan who served as Ward Councillor for Ward 30 in the greater White River area.

The city wishes the three seasoned former councillors well in their new roles in government in pursuit of excellent service to the people of Mpumalanga. Just the other day, we learnt with excitement that one of our own, the former speaker, honourable MJ Msibi was appointed the MEC for Cooperative Governance & Traditional Affairs, meaning that he is not lost to local government. We are optimistic that his local government experience will stand him in good stead in this portfolio.

In the same breath, we are also excited to welcome the newly elected honourable Speaker, duly elected to lead this august house for the remainder of this term of office of this Council. In you, Councillor Siwela we have a man who is equal to the task, with wealth of experience, having been in the local government sphere for a number of terms of office. As a former member of the Executive Arm as well as a being a Ward Councillor at some point, I think I am speaking on behalf of all of us in this house that you will discharge your responsibilities of oversight to the executive with aplomb as he is quite versed on what is expected of us as mandated by council.

Of course we would be doing so much injustice if we do not congratulate and wish all the ministers and deputy ministers well as appointed by the president on Wednesday night coming from our beautiful province of Mpumalanga to be part of his cabinet, some of whom are from the City Mbombela, having graced this very Council Chambers. The province has a total of 9 representatives in the Executive (Deputy President, 2 Ministers and 6 Deputy Minister), a milestone worth celebrating indeed. We believed that as we enter the new dawn of self-correct and renewal, we will usher in the new light that will give our people a sense of pride and belonging.

Today, as we reflect on the year that has passed, we can attest to meaningful progress. South Africans, as well as our citizens of Mpumalanga and of course our own people of the City of Mbombela in their multitudes have embraced the renewal that our country is going through and are much more hopeful about a better tomorrow. Such a hope is not baseless; it is grounded on the progress that is being made. Over the last year, our leaders have begun to

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rebuild a durable social compact for fundamental social and economic transformation with key stakeholders as promised.

As social partners, in government we are restoring the bonds of trust, dialogue and cooperation. We are reaching out to those parts of our society that have become disaffected, disinterested or marginalised through various forms of dialogue and engagement. Our efforts may have been uneven, and we still have much work to do, but we have demonstrated over the last year our shared determination to work together to confront our common challenges. We have focused our efforts on re-igniting growth and creating jobs through various means and anchor projects across our city.

We believe that we are closing the gap and beginning to work together – as government, labour, business, civil society and communities – to remove the constraints to inclusive growth and to pursue far greater levels of investment. The city’s efforts to turn the tide and return to its former glory have begun to yield positive results. Today, we are a proud home to a newly inscribed World Heritage Site, the Barberton Makhonjwa Mountains. This momentous feat was followed by yet another recognition when the city was voted the greenest municipality in the province in November 2018. As we speak, we have just concluded an assessment and were evaluated for the National Greenest Municipality Competition (GMC) last week. We are waiting with bated We are, however not oblivious of the fact that there are still those amongst our society that want to derail us and make us lose focus. The sporadic land grabs that characterize many of our villages and strategic nodes earmarked for development are a course for concern, Not only do these invasions lead to unsavory situations but they also impede progress on the implementation of key projects that will benefit our citizens in job creation and other social amenities thereby growing our economy.

We have also seen an unprecedented wave of what seems to be ritual killings as well as acts of violence towards women and children in our villages. The recent loss of young lives cut short in the area of Mganduzweni and surroundings is just not characteristic of a society we are yearning for. We have said that we want to be the Ultimate Destination for living, working, investing and leisure. This dream can only be realized in an environment where people are safe. Much as we appreciate the speed at which the suspects were apprehended, of greater worry was the manner in which our people discharged mob justice which can only lead to more violence.

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Honourable Speaker, as the Executive arm we appreciate the oversight role played by the Legislative Arm as it ensures that we fulfill our legislative mandate without fail and utilize these resources prudently. The 2019/2020 IDP and Budget consultative process has also given us another opportunity to review our legislative mandate to strategically ensure our commitment to the delivery of services to our people. We commit here today that, the 5 year road map which I may indicate that it is midway towards the finish line, in the form of the Integrated Development Plan (IDP) and Budget for 2019/2020 – 2021/22 and the Medium-Term Revenue and Expenditure Framework of the City of Mbombela will be our guiding document throughout this journey.

Part of the undertaking we had after the adoption of the draft IDP & Budget on 29 March was to ensure that the final document does not remain static and rigid but that it accommodates some measure of flexibility. When we went out to consult with communities from 10 April to 17 May, we came to a realization that some key projects had to added in order to intervene in areas of need as identified by our communities.

Honourable Speaker, as per the legislation that governs our work we had had to consult widely in order to arrive at an acceptable and realistic road map. During the consultative process as agreed upon by this council, the stakeholders were very firm in what they believed were genuine issues affecting them on a daily basis. Those being the triple challenges of poverty, inequality and unemployment.

During our internal Strategic planning sessions we sat to consider the issues received from the communities, State of the Nation Address (SONA) and State of the Province Address (SOPA) but due to the fact that this year was an extraordinary year, the city had to consider a myriad of other factors in the drafting and compilation of this IDP and Budget which consequently resulted in this IDP and Budget for 2019/20 financial year and the outer years. The year 2019 has been an extraordinary year in the sense that, in one year we had to consider those two important milestones mentioned above but also had to listen to the incoming President and Premier respectively as the fifth administration ended and the sixth administration was to be ushered in.

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After we had presented the draft IDP for the adoption by the Municipal Councils on 29 March, we made available to the public for written representations or inputs in terms of section 21A & B of the Local Government: Municipal Systems Act, 32 of 2000.

The IDPs were also presented at the Ehlanzeni District Municipality’s IDP Rep Forum to afford sector departments, district and adjacent municipalities an opportunity to comment on the documents. As a secondary city, we also undertook extensive and robust discussions with the National Treasury to ensure that our final product is credible and compliant. We are happy to indicate to the citizens of our city that indeed our IDP was found to be credible and having realistic aspirations.

It must be noted that the consolidated IDP was compiled in accordance with the Department of Cooperative Governance and Traditional Affairs (COGTA) IDP framework and guidelines.

Honorable Speaker and Members of Council, I need to point out that as we prepare and put together this budget, we were also mindful of the fact that the municipality does not exist in isolation so it will always be influenced by what happens globally, regionally, and nationally guided by the National Development Plan (NDP) strategic objectives and of course our provincial priorities.

Honourable Speaker, what we are tabling today before this August house, is indeed informed by all these trends and realities that our communities are faced with on a daily basis. However more importantly what our people out there have been yearning for, is summed up into five (5) priorities of Government at both national and provincial level. Government has committed itself to make a difference in the lives of our people by addressing the five key priority areas which are education, fighting crime and corruption, health, employment and rural development.

The Back to Basics programme for local government continues to guide us to promote good governance and effective administration through cutting wastage, spending public funds prudently, hiring competent staff, and ensuring transparency and accountability in municipalities.

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MACRO AND INTERNAL ENVIRONMENTAL FACTORS IMPACTING ON THE BUDGET

The economic growth rate has remained stagnant at less than 2 percent in 2018 it was 0.8 percent following a growth rate of 1.4 percent in 2017.The prerequisites for increased revenue and expanded service delivery are more rapid growth, investment and job creation. The GDP growth rate is forecasted at 1.5 percent in 2019, 1.7 percent in 2020 and 2.1 percent in 2021.The downward revision takes into account the weaker investments outcomes in 2018, a more fragile recovery in household income and slower export demand than expected moderating global growth. Consumer inflation has also been revised down due to lower oil prices and food inflation than previously assumed there is however a growth in agriculture, manufacturing and transport sectors with a relatively concern about a negative growth in the mining and construction sectors.

The main risks to the economic outlook are continued policy uncertainty and deterioration in the finances of state-owned entities like Eskom. These factors, alongside continued high unemployment and slow growth will continue to exert pressure on the municipal revenue generation and collection levels hence a conservative approach is advised for municipal revenue projections. The drought experienced by many municipalities in several provinces poses a significant risk the impact is uncertain much depends on how long it will prevail, the extent to which specific catchment areas are affected and the success of mitigation measures and must consider its impact on revenue generation.

Although municipal finances are under pressure in many areas of the country as a result of the rising cost of delivering basic services and weak planning and controls, with poor management decisions leading to underinvestment and insufficient maintenance of infrastructure. Municipalities still has a role to play in turning around the economy through the resources allocated in the medium-term revenue and expenditure framework that it contributes towards the alleviation of unemployment, Social infrastructure improvement, enhancing of economic growth reforms, support urgent matters of education and health by provinces, poverty and inequality challenges. As the prospect of economic growth remains sluggish, the impact of this phenomena is that the municipality will not experience significant improvement on the revenue generation and collection hence a conservative approach is advised for projecting revenue on the medium-

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term revenue and expenditure framework. The implications of insignificant improvement on the municipal revenue is that there should be a repriotization of the municipal programmes and elimination of non-priority spending or expenditure to ensure the core service delivery programmes are not adversely affected by this situation.

PUBLIC PARTICIPATION AND CONSULTATIVE PROCESS

Community and stakeholder participation in matters of local government is a cornerstone of democracy. Section 152 of the South African Constitution (Act 108 of 1996) put it succinctly that: “the objects of local government includes, amongst others, the encouragement of involvement of community and community organisations in matters of local government”.

Furthermore the Local Government: Municipal Systems Act (Act 32 of 2000) states that a municipality must develop a culture of municipal governance that complements formal representative government with a system of participatory governance, and must for this purpose encourage, and create conditions for the local community to participate in the affairs of the municipality, including in the preparation, implementation and review of its integrated development plan.

Subsequent to the tabling of the draft 2019/2020 – 2020/2021 budget and medium-term revenue and expenditure framework (MTREF) on the 29 March 2019, the public participation and consultative process was undertaken in a form of community meetings in various wards from 10 April 2019 to 17 May 2019 as prescribed in terms of Section 22 of the Municipal Finance Management Act No 56 of 2003, read in conjunction with Section 21 of the Municipal Systems Act.

Furthermore consultation meetings were held on the 11 April 2019 with organised business stakeholders and civil society namely; Ratepayers Associations, Mining sector (Barberton Mines (Pty) Ltd), farmers and ratepayers associations and the Taxi industry. On 26 April 2019 we took a further discussion with KLBCT for their input,

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The tabled draft budget documents were also published on the municipal website and notices and were published on the local newspapers and official notice boards.

The municipality has also considered the inputs of National Treasury through the engagement held on 14 May on the draft Budget that was adopted by Council on 29 March 2019 in accordance with Section 23 (1) (b) of the Municipal Finance Management Act (MFMA).

THE PROPOSED FINAL 2019/2020 – 2021/2022 BUDGET AND MEDIUM-TERM REVENUE AND EXPENDITURE FRAMEWORK Taking into account all the inputs made and recommendations, the proposed final budget and Medium Term Expenditure Framework for the 2018/2019 to 2021/2022 financial year is summarized as follows:

The total budget for 2019/2020 will amount to R3 932 billion from a total budget of R3 939 billion in 2018/2019, showing a decrease of 0.18 percent of R7 million and further increases to R4 297 billion over the medium-term.

The operating expenditure budget for 2019/2020 will amount to R3 250 billion, shows an increase of 1.8 percent or R56 million from the 2018/2019 budget of R3 194 billion.

The capital expenditure budget which is 17 percent of the total budget, will amount to R682 million in 2019/2020, showing a decrease of 9 percent or R64 million from the 2018/2019 budget of R746 million.

The operating revenue budget will amount to R2 865 billion, shows an increase of 1 percent or R29 million from the 2018/2019 budget of R2 836 billion and further increases to R3 316 billion over the medium-term.

The operating revenue from property rates and services charges increase by R216 million or 11.9 percent from R1 811 billion in 2018/2019 financial year to R2 027 billion in 2019/2020 and further increases to R2 316 billion over the medium-term.

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The total grants allocation in 2019/2020 will amount to R1 316 billion, showing a slight decrease by R21 million or 1.6 percent from the 2018/2019 allocation of R1 337 billion and further to increase to R1 552 billion over the medium-term.

FINAL OPERATING REVENUE AND EXPENDITURE BUDGET

The final operating revenue and expenditure budget for 2019/2020 – 2021/2022 budget and medium-term revenue and expenditure framework is as follows;

The impact of the main operating expenditure drivers on the final budget is follows as;

(a) The municipality will receive most of its revenue from services charge (electricity, water, sewerage and refuse removal services) amounting to R1 385 billion in 2019/2020 indicating an increase of R182 or 15 percent compared to R1 203 billion in 2018/2019 financial year and further increase to R1 602 billion over the medium-term. The revenue from services charge makes up 48 percent of the operating revenue budget.

(b) The revenue from property rates will increase by 6 percent or R36 million to an amount of R642 million after taking into account income foregone due to rates rebates in terms of the rates policies amounting to R63 million in 2019/2020 financial year and increases to R714 million over the medium-term. The property rates revenue contributes about 22 percent of the total operating revenue budget.

(c) Operating grants allocation comprising of equitable share and other grants will decrease by 1.1 percent or R8.5 million to an amount of R734 million in 2019/2020 financial year compared to R742 million in 2018/2019 financial year and will increase to R874 million over the medium term this contributes 25 percent to the total operating revenue budget in 2019/2020 financial year. The operating grants contributes about 26 percent of the total operating revenue budget

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investments of R34 million, Fines of R8 million and rental of municipal properties R8 million.The other revenue contributes about 3.6 percent of the total operating revenue budget. (a) The municipality has allocated an amount of R31 million in the 2019/2020 financial year for provision of free basic services. The free basic services will be provided in accordance with the criteria set on the indigent policy of the municipality.

Included on this expenditure items is IDP operating projects amounting to R105 million in 2019/2020 financial year and decrease to R79 million in 2021/2022 financial year. The breakdown of the total expenditure for operating projects per municipal priorities

MAIN OPERATING BUDGET REVENUE STREAMS

The main operating revenue streams impact on the final budget is as follows;

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(d) Other revenue amounts to R103 million indicating an increase of R9 million or 9.5 percent compared to R94 million in 2018/2019 financial year. Other revenue comprises of revenue from sundry income of R53 million, Interest from outstanding debtors and investments of R34 million, Fines of R8 million and rental of municipal properties R8 million. The other revenue contributes about 3.6 percent of the total operating revenue budget.

CASHFLOW MANAGEMENT

Honourable Speaker, the municipality will decrease its cash and cash equivalents at the end of the year by 8 percent or R8 million to R87 million in 2019/2020 from R95 million projected cash and cash equivalent in 2018/2019 and decreases to R165 million in 2021/2022 financial year.

It be noted that the net cash to be generated from operating activities will amount to R636 million in 2019/2020 and will increase to R793 over the medium term. The favourable net-cash from operating activities is an indication that the municipality will be able to generate surplus cash from rendering municipal services such as electricity, water, sanitation, solid waste etc.

The surplus cash generated from the operating activities will be utilized to fund the capital expenditure and also to repay the non-current borrowings.

We, however need to note that the achievement of the above will depend on strict and prudent financial and budget management discipline and stringent controls to be implemented by the municipality.

CAPITAL BUDGET OVER THE MEDIUM TERM

Honourable Speaker and fellow Councillors, the Capital Budget for 2019/2020 financial year amounts to R682 Million, 2020/2021 will be R700 Million and R771 Million in 2021/2022 financial year. The breakdown is as follows:

The municipality will be spending in the next three years R1 844 billion (86 percent) of the total capital expenditure budget) on social infrastructure development to address backlogs and upgrading of the existing infrastructure in the following priority areas;

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(a) Public Transport Infrastructure budget allocation will be R664 million over the medium- term and the allocation for 2019/2020 is R199 million. Expansion of Chris Hani Road Kanyamazane is allocated an amount of R83 million over the medium term. The University Public Transport Precinct R40/D725 will continue and the budget allocated for the projects is R51 million over the medium term. The Upgrade of R40 road through Hazyview is allocated R36 million over the medium term. Upgrade of Tom Lawrence road Whiteriver has an allocation of R35 million over the medium term. Bosch street interchange has been allocated a budget of R30 million over the medium-term. Legogote Public transport facility is allocated R25 million over the medium term. Matsulu Public Transport facility is allocated R23 million. KaNyamazane Public transport facility is allocated R20 million. The upgrade of Rail Bridge over Friedenheim road is allocated R20 million over the medium term the rest of the projects are part of the detailed capital budget Annexure.

(b) The allocation for Roads and storm water infrastructure over the medium-term will amount to R620 million and the allocation for 2019/2020 is R181 million. Upgrade of Luphisi Kabokweni and Plaston Road has been allocated a budget of R84 million over the medium-term. Upgrade of gravel to interlocking paving within Umjindi areas is allocated R25 million over the medium term. Construction of Salubindza bus route has been allocated R22 million over the medium term. Construction of Masinga to Entokozweni bus route is allocated R20 million over the medium term. Construction of Nkululeko Circuit Street has an allocation of R18.5 million over the medium term. All the following projects are allocated R17 million each over the medium term; Construction of Siphumelele to Mphatseni bus route, Upgrade of Ka-Nkambule to Ka-Mkheyi bus route, Upgrade of Zamokuhle bus route, Upgrade of Lungisani Secondary School to Mdumiseni Primary School and Construction of Bermuda road.

(c) Bulk water and reticulation infrastructure budget allocation will amount to R309 million over the medium-term and the allocation for 2019/2020 is R114 million. Nsikazi south water reticulation scheme is allocated an amount of R60 million over the medium term. Nsikazi north water reticulation scheme also has an allocation of R60 million over the medium term. Provision of Nsikazi South Bulk Water supply Scheme phase 2 (Electrical Mechanic works) has been allocated an amount of R36 million over the medium term.

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The construction of the Karino/Nsikazi South Bulk Water supply Scheme phase 2 (OMO reservoir) remains a priority and an amount of R29 million is allocated. Matsulu water treatment works refurbishment is allocated an amount of R28 million over the medium term. Phumlani water scheme has been allocated an amount of R28 million over the medium term and Nsikazi north bulk water scheme is budgeted for R20 million over the medium term, the rest of the projects are part of the detailed capital budget Annexure.

(d) Electricity supply and management infrastructure allocation will amount to R178 million over the medium-term and the allocation for 2019/2020 is R52 million. Electrification of 915 household in various wards within the city including 400 households at Msholozi is allocated R34 million over the medium term. Umjindi ext. 17 switching station and bulk supply is allocated R22 million over the medium term. Umjindi water works substation phase 3 is budgeted for an amount of R21 million over the medium term. The upgrade of bulk supply at Msholozi (Mbombela) will continue with a budget of R9.5 million over the medium term. Retrofitting of existing public lighting fitting with new LED technology is allocated an amount of R8 million over the medium term. R4 million is allocated for the installation of highmast lights within the city Baamtjie will remain a priority.

(e) Sanitation and sewerage infrastructure allocation will amount to R73 million over the medium-term and the allocation for 2019/2020 is R30 million. The construction of Entokozweni sewer reticulation remains a priority and has been allocated a budget of R55.7 million over the medium-term. Refurbishment and upgrade of Northern Bulk outfall sewer is budgeted for R5.5 million over the medium term period. Mataffin outfall sewer will be upgraded at a cost of R4 million over the medium term. Refurbishment of Telkom pump station and Hazyview waste water treatment has been allocated an amount of R2.5 million over the medium term. Construction of a new Kabokweni pump station, outfall sewer and associated infrastructure is also allocated an amount of R2 million.

INTERVENTIONS (IN RESPONSE TO THE PUBLIC OUTCRY)

As part of our intervention, we agreed to add the following projects across the regions:

 Mzamane access road in Ward 21 at KaNyamazane due to an urgent need. Allocation of R2.2Million in 2021-2122 financial year.

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 The Msholozi foot bridge was also added to respond to dire situation in that area in Ward 14 of the Central Region has been allocated R6.5 Million in the 2020/2021 financial year  Mlambongwane road in Ward 43 was another project added to the list at the Southern region with an allocation of 10 Million in 2021/2022 financial year  In Ward 29, the eMazambaneni road needed paving as the road is unusable during rains. Their allocation is R3.5 Million in the 2021/2022 financial year.  We have also added 10 high mast lights spread across the regions over the medium term in our quest to fight crime. A total of 29 Million has been allocated over the medium term.

CONCLUSION As I conclude, Honourable Speaker our appreciation goes to the citizens of the City of Mbombela for the belief and trust they have on the municipality and the ruling party and the other parties in Council. And I would like to assure our citizens that we will indeed deliver on the mandates given to us and we dare not fail them.

I would also like to extend my warmest words of appreciation to the administration team led by the seconded City Manager, his Deputy City Managers, the Chief Financial Officer and the rest of the Administration for continued vigilance and keeping focus ensuring that they don’t get detracted and drop the ball at crucial moments.

To this end Honorable Speaker and the esteemed Members of Council I hereby table the 2019/2020 IDP, Budget and medium-term revenue and expenditure framework to council for consideration and approval.

I THANK YOU

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1.2 COUNCIL RESOLUTIONS

On 31 May 2019, under item A(3), the council of City of Mbombela met at the council chambers to consider the 2019/2020– 2021/2022 final annual budget and medium-term revenue and expenditure framework report tabled by the executive Mayor and resolved that;

(a) Council take note of the content of the report

(b) the final medium term revenue and expenditure framework (budget) consisting of an operating and capital budget for the 2019/2020–2021/2022 financial years, as reflected in the table below, be approved:

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MP326 City of Mbombela - Table A1 Budget Summary 2019/20 Medium Term Revenue & Description 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Pre-audit Budget Year Budget Year Budget Year R thousands Outcome Outcome Outcome Budget Budget Forecast outcome 2019/20 +1 2020/21 +2 2021/22 Financial Performance Property rates – – 466,134 602,531 606,531 606,531 574,739 642,360 677,047 713,608 Serv ice charges – – 1,095,063 1,178,525 1,204,525 1,204,525 1,137,840 1,384,977 1,492,120 1,602,055 Inv estment rev enue – – 8,581 1,740 5,740 5,740 7,016 6,329 6,977 7,693 Transfers recognised - operational – – 776,204 741,061 742,116 742,116 745,857 733,561 796,761 874,460 Other ow n rev enue – – 138,129 276,634 276,634 276,634 265,721 97,340 107,074 117,782 Total Revenue (excluding capital transfers and – – 2,484,111 2,800,491 2,835,546 2,835,546 2,731,172 2,864,567 3,079,980 3,315,597 contributions) Employ ee costs – – 793,706 887,762 890,762 890,762 834,551 1,010,483 1,075,118 1,146,614 Remuneration of councillors – – 38,422 41,696 41,696 41,696 32,818 43,865 46,277 48,822 Depreciation & asset impairment – – 502,874 540,557 539,057 539,057 57 545,585 595,964 625,762 Finance charges – – 66,272 40,039 43,419 43,419 27,901 45,677 48,144 50,743 Materials and bulk purchases – – 753,528 791,755 715,358 715,358 678,157 893,674 956,164 1,024,272 Transfers and grants – – 31,912 35,310 31,681 31,681 27,229 32,670 34,580 36,734 Other ex penditure – – 922,756 873,161 934,317 934,317 681,779 677,973 622,940 593,090 Total Expenditure – – 3,109,470 3,210,279 3,196,290 3,196,290 2,282,492 3,249,926 3,379,187 3,526,037 Surplus/(Deficit) – – (625,359) (409,788) (360,744) (360,744) 448,680 (385,360) (299,207) (210,440) Transfers and subsidies - capital (monetary allocations) (National – / Prov incial and – District) 443,780 536,992 604,414 604,414 410,415 582,682 622,246 677,727 Contributions recognised - capital & contributed assets – – 3,242 – – – 11,051 – – – Surplus/(Deficit) after capital transfers & – – (178,337) 127,204 243,670 243,670 870,146 197,322 323,039 467,287 contributions Share of surplus/ (deficit) of associate – – – – – – – – – – Surplus/(Deficit) for the year – – (178,337) 127,204 243,670 243,670 870,146 197,322 323,039 467,287

Capital expenditure & funds sources Capital expenditure – – 100,123 630,592 743,275 743,275 472,368 682,362 696,946 771,427 Transfers recognised - capital – – 87,462 536,992 604,414 604,414 383,378 580,682 620,246 705,727 Borrow ing – – – – – – – – – – Internally generated funds – – 12,661 93,600 138,861 138,861 88,989 101,680 76,700 65,700 Total sources of capital funds – – 100,123 630,592 743,275 743,275 472,368 682,362 696,946 771,427 Financial position Total current assets – – 449,378 625,976 601,049 601,049 660,333 707,018 860,095 879,658 Total non current assets – – 7,567,820 8,041,097 8,273,998 8,273,998 8,021,478 7,880,130 8,514,211 9,243,191 Total current liabilities – – 1,733,242 742,927 742,927 742,927 1,680,907 989,855 926,709 987,214 Total non current liabilities – – 595,904 552,492 552,492 552,492 441,456 528,817 502,870 470,539 Community w ealth/Equity – – 5,688,052 7,371,653 7,579,627 7,579,627 6,559,448 7,068,475 7,944,726 8,665,097 Cash flows Net cash from (used) operating – 612,276 558,854 584,844 679,451 679,451 679,451 635,595 748,203 793,135 Net cash from (used) inv esting – (610,544) (481,753) (584,891) (619,891) (619,891) (619,891) (614,126) (662,099) (732,856) Net cash from (used) financing – (4,223) (8,079) (27,247) (57,247) (57,247) (57,247) (29,971) (32,369) (35,606) Cash/cash equivalents at the year end – 23,864 92,887 120,127 95,200 95,200 2,314 86,698 140,433 165,107 Cash backing/surplus reconciliation Cash and inv estments av ailable – – 111,284 178,559 153,632 153,632 68,188 86,698 140,433 165,107 Application of cash and inv estments – – 1,326,642 294,601 296,425 296,425 989,123 333,736 174,544 235,378 Balance - surplus (shortfall) – – (1,215,358) (116,042) (142,793) (142,793) (920,935) (247,038) (34,110) (70,270) Asset management Asset register summary (WDV) – – 6,343,684 7,978,514 8,211,415 8,211,415 8,211,415 7,880,130 8,514,211 9,243,191 Depreciation – – 502,874 540,557 539,057 539,057 539,057 545,585 595,964 625,762 Renew al and Upgrading of Ex isting Assets – – 29,299 196,399 252,815 252,815 252,815 223,557 217,168 274,500 Repairs and Maintenance – – 41,568 15,838 9,989 9,989 9,989 14,657 12,860 11,679 Free services Cost of Free Basic Serv ices prov ided – – – 194,236 194,361 194,361 201,310 201,310 210,514 220,172 Rev enue cost of free serv ices prov ided – – 248,914 308,221 308,221 308,221 155,491 155,491 163,518 171,960 Households below minimum service level Water: – 37 37 37 37 37 37 37 37 37 Sanitation/sew erage: – – 18 18 18 18 18 18 18 18 Energy : – – 16 16 16 16 16 16 16 16 Refuse: – 142 142 142 142 142 142 142 142 142

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(c) The final operating expenditure projects budget for the 2019/2020 – 2021/2022 financial years, attached as Annexure 484/2019, summarised per municipal priority as tabulated below be adopted; DEPARTMENT 2019/2020 2020/2021 2021/2022 BUDGET BUDGET BUDGET CITY PLANNING & DEVELOPMENT R 20 086 861 R 17 073 832 R 15 366 449 COMMUNITY DEVELOPMENT R 4 839 872 R 4 113 891 R 3 702 502 ECONOMIC DEVELOPMENT R 13 678 989 R 11 627 141 R 10 464 427 GOOD GOVERNANCE R 238 000 R 202 300 R 182 070 RURAL DEVELOPMENT R 1 330 000 R 1 130 500 R 1 017 450 COMMUNITY SERVICES R 4 841 909 R 4 115 622 R 3 704 060 COMMUNITY DEVELOPMENT R 3 566 909 R 3 031 872 R 2 728 685 SOLID WASTE MANAGEMENT R 1 275 000 R 1 083 750 R 975 375 CORPORATE SERVICES R 12 530 200 R 10 650 670 R 9 585 603 GOOD GOVERNANCE R 12 530 200 R 10 650 670 R 9 585 603 COUNCIL R 3 051 500 R 2 593 775 R 2 334 398 GOOD GOVERNANCE R 3 051 500 R 2 593 775 R 2 334 398 DMM - INSTITUTIONAL DEVELOPMENT R 4 584 213 R 2 196 581 R 1 976 923 GOOD GOVERNANCE R 2 952 213 R 809 381 R 728 443 WATER SUPPLY R 1 632 000 R 1 387 200 R 1 248 480 ENERGY R 6 940 250 R 5 899 213 R 5 309 291 ELECTRICITY SUPPLY AND MANAGEMENT R 6 940 250 R 5 899 213 R 5 309 291 FINANCIAL SERVICES R 19 667 814 R 16 547 642 R 14 892 877 FINANCIAL SERVICES R 2 781 373 R 2 364 167 R 2 127 750 FINANCIAL VIABILITY R 15 422 491 R 13 109 117 R 11 798 206 GOOD GOVERNANCE R 1 463 950 R 1 074 358 R 966 922 OFFICE OF COUNCIL R 1 904 000 R 1 618 400 R 1 456 560 GOOD GOVERNANCE R 1 904 000 R 1 618 400 R 1 456 560 PUBLIC SAFETY R 2 998 447 R 2 038 680 R 1 834 812 GOOD GOVERNANCE R 600 000 R - R - PUBLIC SAFETY R 2 398 447 R 2 038 680 R 1 834 812 PUBLIC WORKS & TRANSPORT R 24 327 282 R 20 978 190 R 19 080 371 ROADS INFRASTRUCTURE DEVELOPMENT ANDR STORMWATER 22 327 282 R 18 978 190 R 17 080 371 WATER SUPPLY R 2 000 000 R 2 000 000 R 2 000 000 WATER & SANITATION R 4 436 404 R 3 770 944 R 3 393 849 WATER & SANITATION R 1 353 928 R 1 150 839 R 1 035 755 WATER SUPPLY R 3 082 476 R 2 620 104 R 2 358 094 Grand Total R 105 368 879 R 87 483 547 R 78 935 193

(d) the final capital expenditure budget for the 2019/2020 – 2021/2022 financial years detailed as Annexure 483/2019 summarised per municipal priority as tabulated below be approved;

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MUNICIPAL PRIORITY 2019/2020 2020/2021 2021/2022 BUDGET BUDGET BUDGET Community Development R 45 250 324 R 23 892 160 R 14 500 000 Community Services R 8 900 000 R 8 000 000 R 9 500 000 Office of Council R 150 000 R - R - Public Work Road and Transport R 36 200 324 R 15 892 160 R 5 000 000 Economic Development R 3 000 000 R 5 000 000 R - City Planning and Development R 3 000 000 R 5 000 000 R - Electricity Supply and Management R 51 510 000 R 65 700 000 R 61 200 000 Energy R 51 510 000 R 65 700 000 R 61 200 000 Financial Viability R 14 000 000 R - R - Financial Management R 14 000 000 R - R - Good Governance R 25 300 000 R 25 000 000 R 26 000 000 Corporate Services R 23 500 000 R 25 000 000 R 26 000 000 Regional Centre Co-ordination R 1 800 000 R - R - Mbombela Stadium Prencinct development R 15 000 000 R 15 000 000 R 55 000 000 Public Work Road and Transport R 15 000 000 R 15 000 000 R 55 000 000 Public Participation R 130 000 R - R - Office of Council R 130 000 R - R - Public Safety R 200 000 R - R - Pubblic Safety R 200 000 R - R - Public Transport R 198 919 000 R 209 848 000 R 255 586 000 Public Work Road and Transport R 198 919 000 R 209 848 000 R 255 586 000 Roads Infrastructure Development and StormwaterR 181 150 000 R 224 505 840 R 214 141 000 City Planning and Development R 15 000 000 R 28 803 000 R 40 000 000 Public Work Road and Transport R 166 150 000 R 195 702 840 R 174 141 000 Sanitation/Sewerage R 30 229 083 R 23 000 000 R 20 000 000 Public Work Road and Transport R 19 729 083 R 20 000 000 R 20 000 000 Water And Sanitation R 10 500 000 R 3 000 000 R - Solid waste R 3 500 000 R 10 000 000 R 25 000 000 Public Work Road and Transport R 3 500 000 R 10 000 000 R 25 000 000 Water Supply R 114 173 593 R 95 000 000 R 100 000 000 Public Work Road and Transport R 33 173 593 R 32 000 000 R 10 000 000 Water And Sanitation R 81 000 000 R 63 000 000 R 90 000 000 Grand Total R 682 362 000 R 696 946 000 R 771 427 000

(e) the final annual budget for the financial year 2019/2020; and indicative allocations for the two projected outer years 2020/2021 and 2021/2022; and the multi-year and single year capital appropriations be adopted as set-out in the new budget and reporting regulations attached as Annexure 485/2019;

 Budgeted Financial Performance (revenue and expenditure by standard classification)  Budgeted Financial Performance (revenue and expenditure by municipal vote)  Budgeted Financial Performance (revenue by source and expenditure by type)  Multi-year and single year capital appropriations by municipal vote and standard classification and associated funding by source.

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(f) the financial position, cash flow, cash-backed reserve/accumulated surplus, asset management and basic service delivery targets as set out in the new budget and reporting regulations in the following tables as in Annexure 485/2019, be adopted

 Budgeted financial position  Budgeted cash flows  Cash backed reserves and accumulated surplus reconciliation  Asset management  Basic service delivery measurement

(g) in terms of sections 24(2)(c)(i) and (ii) of the Local Government : Municipal Finance Management Act, 56 of 2003, sections 74 and 75A of the Local Government: Municipal Systems Act, 32 of 2000, as amended and the Municipal Property Rates Act, 6 of 2004, the tariffs for the supply of water, electricity, waste services, sanitation services and property rates as set out below, that were used to prepare the estimates of revenue by source, be considered for implementation with effect from 1 July 2019 be adopted;

Rates and Services Charges Tariffs Increase %: 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 Property Rates 6.40% 0.00% 6.00% 5.40% 5.40% 5.40% 5.40% Electricity 2.12% 7.82% 13.07% 5.40% 5.40% 5.40% 5.40% Water 7.78% 6.44% 5.90% 5.40% 5.40% 5.40% 5.40% Refuse Removal 7.78% 6.44% 5.90% 5.40% 5.40% 5.40% 5.40% Sewerage 7.78% 6.44% 5.90% 5.40% 5.40% 5.40% 5.40% Concession Area - Water and Sanitation 13.32% 7.43% 12.00% 12.00% 12.00% 12.00% 12.00% Average Increase - Non-Concession Area 6.37% 5.43% 7.35% 5.40% 5.40% 5.40% 5.40% Average Increase - Concession Area 7.40% 5.42% 9.24% 7.05% 7.05% 7.05% 7.05%

Sundry charges tariffs and fees 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

(h) Council take note of the 2019/2020 Procurement Plan as per annexure 474/2019.

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1.3 EXECUTIVE SUMMARY

The application of sound budget and financial management principles for the compilation of the City’s financial plan is essential and critical to ensure that the City remains financially viable and that municipal services are provided sustainably, economically and equitably to all communities.

The City has embarked on implementing a range of revenue collection strategies to optimize the collection of debt owed by consumers and also promulgating its credit control and debt collection policy into a by law.

The National Treasury Municipal budget guidelines and assumptions in accordance with the Municipal Finance Management Act and its Regulations and Circulars as well as views from organised business stakeholders traditional leaders and other relevant legislations have also been taken into consideration when compiling the final 2019/2020 – 2021/2022 MTREF budget, including the prevailing macro and internal environment factors.

The 2019/2020 budget and medium-term revenue and expenditure framework is prepared at a time when global and national economies are experiencing a period of protracted economic weakness which diminishes private investment. This may be attributed to domestic constraints, associated to political uncertainty, and declining business and consumer confidence. This has been demonstrated by the downward revision of the economic growth forecast for 2018/2019 period from 1.5 per cent to 0.7 per cent during the 2018/2019 Medium Term Budget Policy Statement delivered by the Minister of Finance. The actual economic growth rate for 2018/2019 tend to be 0.8 per cent which is 0.1 per cent above the projected growth rate. During the 2018/2019 financial period the national economy experienced a technical recession after which positive results emerged towards the fourth quarter of 2018/2019.

During the 2018/2019 period economic growth has remained stagnant at less than 1 percent and unemployment remains high at 27.2 percent. The prerequisites for increased revenue and expanded service delivery are more rapid growth, investment and job creation. The President of the Republic has established an investment envoy to help in attracting investment and a target of $100 billion was made to be achieved in the next five years. This is going to help the country in fighting the high level of unemployment facing the country at the present moment.

The real GDP growth rate is forecasted at 1,5 percent in 2019, 1,7 percent in 2020 and 2,1 percent in 2021. Inflation is also projected to remain within the target range of 3 – 6 per cent for the Medium term , forecasted to be 5.2 per cent in 2019/2020 and 5.4 per cent in 2020/2021 and 2021/2022 respectively.

The main risks to the economic outlook are continued policy uncertainty and deterioration in the finances of state-owned entities. The drought experienced in several provinces poses

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significant risks to agriculture and tourism for the period ahead, and this may threaten jobs in these sectors. The current water crisis in the Western Cape and other provinces will affect economic growth. While the drought’s impact is uncertain much depends on how long it will prevail; the extent to which specific catchment areas are affected; and the success of mitigation measures.

The municipality has a role to play in ensuring through resources allocated on the budget and the medium-term revenue and expenditure framework that it contributes towards the alleviation of unemployment, poverty and inequality challenges. The new Preferential Procurement Regulations enacted on 20 January 2017 that come into effect on 01 April 2017 is still relevant and provides a mechanisms of ensuring that there is local economic beneficiation and empowerment of emerging small business enterprises on the procurement system of the organs of the state. The municipality should also consider the expanded public works programmes initiatives to create employment by utilising labour intensive mechanisms on implementation of its capital programmes and rendering of certain services.

As the prospect of economic growth remains sluggish, the impact of this phenomena is that the municipality will not experience significant improvement on the revenue generation and collection hence a conservative approach is advised for projecting revenue on the medium- term revenue and expenditure framework. The implications of insignificant improvement on the municipal revenue is that there should be a re-priotization of the municipal programmes and elimination of non-priority spending or expenditure to ensure the core service delivery programmes are not adversely affected by this situation.

Vision 2030 Strategy and Integrated Development Plan (IDP)

In line with the National Development Plan, the City has developed a Vision 2030 strategy that would give effect to the integrated growth and development of the City. The Vision 2030 strategy provides a platform and framework for the desired future of the City and that will be achieved through the following four strategic objectives of the strategy;

(a) To transform the spatial structure of the City. (b) To establish a competitive economic position. (c) To plan for, install, maintain and operate infrastructure, and provide services more efficiently and on a sustainable basis. (d) To lead, direct and manage spatial growth of the City robustly, enhance revenue generation and improve operational efficiency.

The future planning and development of the City will be guided by these four strategic objectives and as a result the 2017-2022 Integrated Development Plan is responding to these strategic objectives. The following key municipal priorities have been identified to take the developmental agenda of the City forward;

(a) Water supply (b) Road infrastructure development and storm water

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(c) Electricity supply and management (d) Integrated human settlement (e) Good governance and public participation (f) Sanitation (g) Community development (h) Rural development (i) Economic development (j) Waste and environment management (k) Financial viability and management (l) Public transport (m) Public Safety (n) 2010 legacy The Integrated Development Plan as a developmental plan for the City will foster how effectively resources should be allocated and utilised. The budget should respond to these developmental agenda encompassed on the Integrated Development Plan and the following are the budget objectives;

(a) To improve adherence to legislative, governance and institutional development framework. (b) To improve financial performance and sustainability over the long term. (c) To ensure the citizens of the City are provided with acceptable levels of services. (d) To maintain the existing assets and infrastructure base by ensuring adequate repairs and maintenance is undertaken. (e) To achieve a clean audit outcome. (f) To enable local economic development initiatives and sustainable employment creation. (g) To ensure the smooth transition as a result of the amalgamation process in terms of reorganisation and restructuring of policies, processes and systems.

1.3.1 National priorities

National priorities- Expanding public sector investment infrastructure

The key priorities in the local government and housing function are the provision of basic services such as water and sanitation, human settlements development and local government infrastructure.

In addition, creating decent employment opportunities remains a national priority and the City need to continue to explore opportunities to mainstream labour intensive approaches to delivering services, and more particularly to participate fully in the Expanded Public Works Program (EPWP).

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1.3.2 Micro environment factors – economic outlook

From a macro environment perspective, the economic performance over the medium-term looks bleak as a slow economic growth trends has been forecasted and the reflections of this unfavourable economic growth condition will impact negatively on all spheres of government. The revenue base of the City will be under pressure as no new revenues will be derived at the moment due to the slow economic growth and local circumstances.

On the expenditure side - careful analysis and evaluation of the current spending patterns need was done through the 2018/2019 mid-year assessment process so that the allocation of funds in the next medium-term is in line with the key municipal priorities and non-priority spending is eliminated (austerity measures need to be implemented).

The South African economic growth outlook measured in terms of real Gross Domestic Product (GDP) in 2019 to 2023 .According to the 2019 National Budget and other sources, the Consumer Price Index (CPI) is projected to be within the target limits of South African Reserve Bank CPI of 3 - 6 percent band in 2019/2020 financial year. The table below depicts the CPI and economic growth measured in real Gross Domestic Product (GDP) movement over the five (5) period until 2022/2023 financial year;

The forecasted headline inflation for medium-term will be as follows;

Description 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 Economic Outlook: Consumer Price Index (CPI) % 6.4% 5.7% 5.2% 5.4% 5.4% 5.4% 5.4% Real Gross Domestic Product (GDP) % 1.3% 0.7% 1.5% 1.7% 2.1% 2.1% 2.1% Annualised Nominal Price Rate Increase % 7.78% 6.44% 6.78% 7.19% 7.61% 7.61% 7.61%

Prime Lending Rate (Interest Rate) 10.25% 10.25% 10.25% 10.25% 10.25% 10.25% 10.25% Repo Lending Rate 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75%

1.3.3 Revenue enhancement assumptions

The City has appointed a service provider to fast track the implementation of the revenue enhancement projects and also a service provider to assist in developing an appropriate cost reflective structure on water and sanitation, refuse removal, and electricity tariffs to phase in the necessary tariff increase in a manner that will spread the impact on consumer over a period of time as prescribed in MFMA Circular 58.

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(a) Grants allocations

Due to the fiscal reprioritasation and reductions undertaken during the 2018 Medium Term Policy Statement (MTBPS) affected planned spending for 2019/2020. The substantial reduction has been applied to the most three largest conditional grants namely the Municipal Infrastructure grant and Public Transport Network grant.

The Municipal Infrastructure Grant shows a decrease of 1 percent in 2019/2020 and 2020/2021 financial years increase by 6 per cent while in 2021/2022 financial year .total allocation increased by 9 per cent .Public Transport Network Grant shows a decrease of 24 percent in 2019/2020 and a 5 percent increase in 2020/2021 with an increase of 8 percent 2021/2022 financial year.

National Treasury has introduced the following reforms on the infrastructure conditional grants;

(i) The introduction of the new urban infrastructure grants from 2019/2020. Cities will have to meet planning and performance criteria to receive the grant, which will be funded through a shift of funds from the municipal infrastructure grant. The new grant will require cities to plan for a programme of infrastructure investment, funded from grants and own revenues, rather than just standalone projects. This aligns with the policy set out in the Integrated Urban Development Framework (IUDF) approved by Cabinet in April 2016. This approach was planned to be piloted in uMhlathuze and Polokwane local municipalities in 2018/19. Eligible municipalities will be invited to apply for the grant during 2018. The application process is set out in clause 27(5) of the 2018 Division of Revenue Bill.

(ii) The refinement of grant allocation rules to encourage budgeting for routine maintenance. This will complement changes that are already in place to permit grants to fund the refurbishment of infrastructure.

(iii) Introducing greater differentiation between urban and rural areas. Secondary cities in particular will see changes to their planning requirements.

(iv) A new municipal restructuring grant will be introduced to help municipalities in financial crisis to implement reforms to turn themselves around the grant will be made available within the parameters of the existing legal framework and will not provide bailouts to municipalities. It will fund the implementation of specific outputs in support of a financial recovery plan approved by a municipal council. The council must demonstrate political buy-in by adopting such a plan, and the municipality must also commit its own resources to implementing parts of the plan.

The reforms on the local government conditional grants are introduced at the time when the municipality is struggling to keep up with the maintenance and refurbishment requirement of the infrastructure in the peri-urban and rural areas due to inadequate

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financial resources and also where this social infrastructure is built there is absolutely no cost recovery or the social infrastructure built is not revenue generating in nature.

It is therefore recommended that the two Departments namely; Public Roads and Transport, and Water and Sanitation should undertake a process of ensuring the reforms aforementioned on the infrastructure grants are implemented in particular, the development of business plans for the routine maintenance and refurbishment of the social infrastructure located in the peri-urban and rural areas where there is absolutely no cost recovery.

The total grants allocated to the City in terms of the 2019 Division of Revenue Bill amounts to R4 287 billion over the medium term and the grants allocated for the 2019/2020 financial year is R1 316 billion showing a slight decrease of 2 percent growth compared to the 2018/2019 allocation of R1 337 billion and further to increase to R1 419 billion in 2020/2021 in particular.

The table below provides details regarding the 2019/2020 grants allocation over the medium.

2019/2020 TO 2021/2022 GRANTS ALLOCATION CITY OF MBOMBELA GRANTS ALLOCATION Estimate Estimate Forecast Forecast Forecast Forecast Forecast 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024

OPERATING GRANT 9% 10% 10% 10% 5% 5% Equitable Share R 608 678 000 R 661 329 000 R 725 225 000 R 794 261 000 R 871 696 000 R 918 767 584 R 968 381 034 Municipal Systems Improvement Grant (MSIG) R 1 055 000 Financial Management Grant (FMG) R 3 400 000 R 3 470 000 R 2 500 000 R 2 500 000 R 2 764 000 R 2 913 256 R 3 070 572 Municipal Demarcation Transition Grant R 4 566 000 R - R - R - R - R - R - Electricity Demand Side Management R 7 000 000 R - R - R - R - R - R - Expanded Public Works Programme R 6 714 000 R 8 240 000 R 5 836 000 R - R - R - R - TOTAL OPERATIONAL ALLOCATION R 630 358 000 R 674 094 000 R 733 561 000 R 796 761 000 R 874 460 000 R 921 680 840 R 971 451 605 Growth (%) 7% 9% 9% 10% 5% 5%

CAPITAL GRANTS -1% -1% 6% 8% 5% 5% Municipal Infrastructure Grant (MIG) R 339 939 000 R 336 980 000 R 333 753 000 R 353 595 000 R 382 141 000 R 402 776 614 R 424 526 551 Electricity Demand Side Management R - R - R 8 000 000 Water Services Infrastructure Grant R 40 000 000 R - R - R - R - R - R - Neighbourhood Development Partnership Grant R 40 000 000 R 33 535 000 R 15 000 000 R 28 803 000 R 40 000 000 R 42 160 000 R 44 436 640 Public Transport Network Grant R 211 673 000 R 260 854 000 R 198 919 000 R 209 848 000 R 225 586 000 R 237 767 644 R 250 607 097 Intergrated National Electrification Programme R 31 000 000 R 31 045 000 R 27 010 000 R 30 000 000 R 30 000 000 R 31 620 000 R 33 327 480 TOTAL CAPITAL ALLOCATION R 662 612 000 R 662 414 000 R 582 682 000 R 622 246 000 R 677 727 000 R 714 324 258 R 752 897 768 Growth (%) 0% -12% 7% 9% 5% 5%

TOTAL ALLOCATION 1 292 970 000 1 336 508 000 1 316 243 000 1 419 007 000 1 552 187 000 1 636 005 098 1 724 349 373 Growth (%) 3% -2% 8% 9% 5% 5%

IN-KIND ALLOCATIONS Regional Bulk Infrastructure R 40 254 000 R 14 000 000 R 30 000 000 R 30 000 000 R 73 721 000 R 77 701 934 R 81 897 838 Intergrated National Electrification Programme R 57 154 000 R 58 619 000 R 19 167 000 R 61 688 000 R 81 565 000 R 85 969 510 R 90 611 864 Neighbourhood Development Partnership Grant R 1 890 000 R 200 000 R 200 000 R 200 000 R 200 000 R 210 800 R 222 183 TOTAL IN-KIND ALLOCATION R 99 298 000 R 73 874 000 R 49 367 000 R 91 888 000 R 155 486 000 R 163 882 244 R 172 731 885

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The municipality will experience increase above inflation on the equitable share by average of 9 percent per annum in 2019/2020 and 2020/2021 and increase by 10 percent in 2021/2022.

(b) Revising of rates, tariffs and other charges

The municipality need to strike a balance between ensuring it remains financial sustainable but also to ensure the tariffs increase are affordable to the ratepayers and consumer of services, and indigent households are able to access free basic services.

According the 2019 National Budget and other sources, the Consumer Price Index (CPI) is projected to be within the upper limits of South African Reserve Bank CPI of 3 – 6 percent band in 2019/2020 financial year. The table below depicts the CPI and economic growth measured in real Gross Domestic Product (GDP) movement over the five (5) period until 2022/2023 financial year;

The recommended tariffs and fees for property rates, services and sundry charges for 2019/2020 and the medium-term will be as illustrated on the table below;

Sundry charges tariffs and fees 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

There will be a significant increase to the consumers during 2019/2020 financial year as the electricity tariffs are estimated to increase by 15.63 percent as approval by the National Energy Regulator of South Africa (NERSA).The overall fees and tariffs for property rates,

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services will increase by an average 5.9 percent .In the non- concession area in 2019/2020 financial year tariff will increase by an average of 7.35 percent..

Sembcorp tariffs increase is determined in accordance with tariff model stipulated on the Service Agreement Four (4) which takes the current consumer price indexes (CPI) per commodity plus a margin of 4,3 percent and other economic factors into account totaling to 9.24 percent.

The municipality is currently undertaking a process of remodeling of the cost and tariffs from the current financial year and over the next two financial years in the different functional areas such as electricity, water, sanitation, refuse removal and other critical services delivery functional areas to ensure the tariffs and fees charge for rendering such services is a true reflection of the cost. The former Mbombela Local Municipality has undertaken such a process since 2014/2015 to 2016/2017 financial year however the process has to be redone to include the former Umjindi Municipality due to the amalgamation process.

The estimated payment level trends for the current financial and the forecast for the next mid- term including is as follows;

CITY'S PAYMENT RATE ASSUMPTION FOR THE 2019/2020 TO 2021/2022 MEDIUM TERM REVENUE AND EXPENDITURE FRAMEWORK Description 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 Collection on current accounts - Rates and Services charges 92% 95% 95% 95% 95% 90%

The collection rate in 2019/2020 is expected to drop by 5 percent due to the current cash flow situation and economic situation of the municipality and it is projected to stay the same in the outer years will be adjusted as the economic conditions improves.

The debtors factoring mechanisms be explored and considered as a debt collection mechanism to increase the ability of the municipality to collect outstanding debts.

(d) Revenue enhancement strategy

The major challenge faced by the City is that the current revenue base is fully committed and therefore there is a need to first prevent revenue losses, secondly to explore the opportunities of increasing the revenue base and thirdly to explore new revenue streams.

The City of Mbombela has developed a revenue enhancement strategy to address revenue generation, collection and protection potential risks and challenges that impact on the financial governance and sustainability of the municipality. The strategy was approved at the Council meeting held 31 May 2017 under item A(4) for implementation and it is still relevant.

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1.3.4 Operating expenditure guidelines and assumptions

The operating expenditure will increase by an average of 0.14 percent in 2019/2020, 0.19 percent in 2020/2021 and 0.79 percent in 2021/2022 with an exception of the key cost or expenditure drivers stated on the table below; Operating Expenditure Assumptions Operating Expenditure: 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2020/2021 2021/2022 Employees Related Cost 7.36% 6.70% 7.70% 6.65% 6.65% 6.65% 6.65% Councillors Remuneration 6.40% 5.70% 5.20% 5.50% 5.50% 5.50% 5.50% Contracted Services 5.25% 5.25% -15.00% -15.00% -10.00% -10.00% -10.00% Bulk Purchases: Electricity 0.31% 8.00% 15.63% 8.00% 8.00% 8.00% 8.00% Bulk Purchases: Water 8.10% 8.10% 7.40% 7.30% 7.20% 7.30% 7.20% Other Materials 6.33% 6.33% -12.00% -8.00% -8.00% -8.00% -8.00% Transfers and Grants 7.90% 7.90% 7.20% 7.10% 7.00% 7.10% 7.00% Other Expenditure 7.42% 7.42% -15.00% -10.00% -10.00% -10.00% -10.00% Average Increase % 6.13% 6.92% 0.14% 0.19% 0.79% 0.82% 0.79%

The main contributors to the increase on the operating expenditure is the electricity, water bulk purchases and employee related costs.

The key considerations on the operating expenditure are as follows;

(a) The Salary increase is in line with the signed collective bargaining salary agreement. It also be noted that provision is made for filling of critical vacant position existing in the City. ( b) A cut of non-essential expenditure such catering, use of consultants, Travelling and subsistence, Domestic accommodation, catering, financial sponsoring of non- government events, hiring of conference facilities for meetings and study tours must be in line with travelling and accommodation and the cost curtailment regulations overtime must be in line with the overtime management policy and strategy etc. (c) Prevent utilisation of contractors or service providers where there is sufficient staff complement and this will help to reduce cost for contracted services. (d) Review of all supply chain management contracts in particular, the multiple extended contracts and renegotiate contract terms and conditions (deliverables and contract amounts). (e) An operating surplus budget approach was adopted for 2019/2020 and subsequent financial years as a budget model that will ensure the City can start to build cash reserves.

1.3.5 Capital expenditure guidelines and assumptions

The funding of the capital expenditure budget will be sourced from conditional grants allocations and internal reserves. No new external loans (borrowings) will be sourced during 2019/2020 – 2021/2022 Approved Final Budget and Medium Term Revenue and Expenditure Framework Page 33

the medium-term. The City will continue to service current long term borrowing commitment made in previous years before considering making another commitment again.

The funding of capital expenditure from internal generated funds will be minimised to the affordability level of the City. The table below reflect the approved capital budget per funding source for the medium term (2019/2020 to 2021/2122).

2019/2020 TO 2021/2122 CAPITAL BUDGET PER FUNDING SOURCE SOURCE OF FUNDING BUDGET BUDGET BUDGET ESTIMATES ESTIMATES ESTIMATES 2019/2020 2020/2021 2021/2022 Grant - Energy Efficiency and Demand Side Management R 8,000,000 R - R - Grant - Integrated National Electrification Programme R 27,010,000 R 30,000,000 R 30,000,000 Grant - Municipal Infrastructure Grant R 331,753,000 R 351,595,000 R 380,141,000 Grant - Neighbourhood Development Programme Grant R 15,000,000 R 28,803,000 R 40,000,000 Grant - Public Transport Network Grant R 198,919,000 R 209,848,000 R 255,586,000 Internal Funding R 101,680,000 R 76,700,000 R 65,700,000 Grand Total R 682,362,001 R 696,946,000 R 771,427,000

The capital budget per funding source is further reflected below. The charts reflect all the funding sources on which the capital budget expenditure is funded from. The Municipal Infrastructure grant is currently the highest contributor followed by Public Transport Network Gran. Other grants include the national Electrification Programme grant, the neighbourhood Development Programme grant as well as the Energy Efficiency and Demand Side Management grant.

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1.3.6 Provision of free basic services to the indigent households

The Indigent Policy of the City as adopted by Council on the 29 March 2019 is in line with the National Policy on provision of Free Basic Services with its objective of providing free access to basic services to the poor and enhancing the fight against poverty. This policy will be reviewed on annual basis to be in line with the requirements proposed by the National Department of Cooperative Governance and Traditional Affairs.

The following assumptions were also taken into consideration towards the provision of free basic services;

(a) Reducing the impact of poverty through free basic service provision; (b) Protecting the poor from the harsh economic realities;

The City will be offering the following free basic services:

Free Basic Water 6kl per month Free Basic Electricity 50kW per month Free Basic refuse removal 100 % subsidy on tariff Rebate on property rates Rebates ranging from 25% to 100% and first R100 000.00 market value being 100% exempted from rates. Free Basic Sewer 6kl per month

1.3.7 Municipal Standard Chart of Accounts (MSCOA) implementation

In order to ensure the municipality complies with the MSCOA Regulations which requires municipalities and municipal entities to comply with since on 01 July 2017, the municipality is now in phase three (3) on the implementation of the project which entails the seamless interface of sub-systems of other departments within the City to the Core system that has a bearing on the financial management sub-systems and the core system and this phase was completed in 2018. The upgrade to MSCOA version 6.2 to 6.3 chart is released to be used for the compilation of the 2019/2020 Medium Term Revenue and Expenditure Framework.

1.4 OPERATING REVENUE FRAMEWORK

For City of Mbombela to continue improving the quality of services provided to its citizens, it needs to generate the required revenue. In these tough economic times strong revenue management is fundamental to the financial sustainability of every City. The reality is that the City is faced with development backlogs and poverty. The expenditure required to address these challenges will inevitably always exceed available funding; hence difficult choices have to be made in relation to tariff increases and balancing expenditures against realistically anticipated revenues.

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The City’s revenue strategy is built around the following key components:

(a) National Treasury’s guidelines and macroeconomic policy; (b) Growth in the City and continued economic development; (c) Efficient revenue management, which aims to ensure a 90 per cent annual collection rate for property rates and other key service charges such as electricity, water, sewerage and refuse removal services; (d) Electricity tariff increases as approved by the National Electricity Regulator of South Africa (NERSA); (e) Achievement of full cost recovery of specific user charges especially in relation to trading services; (f) Determining the tariff escalation rate by establishing/calculating the revenue requirement of each service; (g) The City’s Property Rates Policy approved in terms of the Municipal Property Rates Act, 2004 (Act 6 of 2004) (MPRA); (h) Increase ability to extend new services and recover costs; (i) The City’s Indigent Policy and rendering of free basic services; and (j) Tariff policies of the City.

The following table is a summary of the 2019/2020 annual budget and MTREF – Revenue classified by main source;

In line with the formats prescribed by the Reporting Regulations, capital transfers and contributions are excluded from the operating statement, as inclusion of these revenue sources would distort the calculation of the operating surplus/deficit.

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Service charge revenue

The municipality will receive most of its revenue from services charge (electricity, water, sewerage and refuse removal services) amounting to R1 385 billion in 2019/2020 indicating an increase of R182 or 15 percent compared to R1 203 billion in 2018/2019 financial year and further increase to R1 602 billion over the medium-term. The revenue from services charge makes up 48 percent of the operating revenue budget.

Property rates revenue

The revenue from property rates will amount to R642 million after taking into account property rates revenue forgone which is rates exemptions and rebates granted in terms of the rates policy amounting to R63 million in 2019/2020 financial year and increases to R677 million and R714 million over the medium-term. The property rates revenue contributes about 22 percent of the total operating revenue budget.

Operating grants Operating grants allocation comprising of equitable share and other grants will decrease by 1.1 percent or R8.5 million to an amount of R734 million in 2019/2020 financial year compared to R742 million in 2018/2019 financial year and will increase to R874 million over the medium term this contributes 25 percent to the total operating revenue budget in 2019/2020 financial year. The operating grants contributes about 26 percent of the total operating revenue budget

Other Revenue Other revenue amounts to R104 million indicating an increase of R9 million or 9.5 percent compared to R94 million in 2018/2019 financial year. Other revenue comprises of revenue from sundry income of R53 million, Interest from outstanding debtors and investments of R34 million, Fines of R8 million and rental of municipal properties R8 million. The other revenue contributes about 3.6 percent of the total operating revenue budget.

Agency Services revenue

The provincial government has taken a decision to take over the function for licensing for the City with effect from 01 July 2019. This therefore will result in decline in other revenue by a huge amount since agency fees was part of other revenue. The City in finalizing the hand over processes of the function so as to ensure that by the 1st of July 2019, it will not be operating under the City.

The following table gives a breakdown of the various operating and capital grants and subsidies allocations to the City over the medium term;

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MP326 City of Mbombela - Supporting Table SA18 Transfers and grant receipts 2019/20 Medium Term Revenue & Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Budget Year Budget Year Budget Year R thousand Outcome Outcome Outcome Budget Budget Forecast 2019/20 +1 2020/21 +2 2021/22 RECEIPTS: 1, 2 Operating Transfers and Grants

National Government: – – 766,331 741,061 741,061 741,061 733,561 796,761 874,460 Local Gov ernment Equitable Share Energy Efficiency and Demand-side [Schedule 5B] – – – – – – – – – Equitable Share – – 608,678 661,329 661,329 661,329 725,225 794,261 871,696 Ex panded Public Works Programme Integrated Grant for Municipalities – [Schedule – 5B] 5,650 8,240 8,240 8,240 5,836 – – Integrated National Electrification Programme – – 5,132 – – – – – – Local Gov ernment Financial Management Grant [Schedule 5B] – – 3,400 3,470 3,470 3,470 2,500 2,500 2,764 Municipal Demarcation and Transition Grant [Schedule 5B] – – 4,566 – – – – – – Municipal Infrastructure Grant – – 57,972 – – – – – – Municipal Infrastructure Grant [Schedule 5B] – – – 19,849 19,849 19,849 – – – Municipal Sy stems Improv ement Grant [Schedule 5B] – – – – – – – – – Municipal Water Infrastructure Grant – – 3,610 – – – – – – Neighbourhood Dev elopment Partnership Grant – – 4,845 – – – – – – Public Transport Netw ork Grant – – – – – – – – – Public Transport Netw ork Grant [Schedule 5B] – – 53,885 48,173 48,173 48,173 – – – Public Transport Netw ork Operations Grant [Schedule 5B] – – 18,593 – – – – – –

Provincial Government: – – – – – – – – –

District Municipality: – – – – – – – – –

Other grant providers: – – 345 – 1,055 1,055 – – – Injury on Duty – – – – – – – – – Municipal Demarcation Board – – – – – – – – – National Heritage Council South Africa – – – – – – – – – Social Relief – – – – – – – – – Unspecified – – 345 – 1,055 1,055 – – – Total Operating Transfers and Grants 5 – – 766,677 741,061 742,116 742,116 733,561 796,761 874,460

Capital Transfers and Grants

National Government: – – 443,780 536,992 604,414 604,414 582,682 622,246 677,727 Energy Efficiency and Demand-side – – – – – – – – – Energy Efficiency and Demand-side [Schedule 5B] – – – – – – – – – Integrated National Electrification Programme – – 26,103 31,045 31,045 31,045 35,010 30,000 30,000 Municipal Infrastructure Grant – – 283,205 317,131 334,980 334,980 333,753 353,595 382,141 Municipal Infrastructure Grant [Schedule 5B] – – – – – – – – – Municipal Water Infrastructure Grant – – 25,663 – – – – – – Neighbourhood Dev elopment Partnership Grant – – 33,290 33,535 33,535 33,535 15,000 28,803 40,000 Public Transport Netw ork Grant – – – 155,281 204,854 204,854 198,919 209,848 225,586 Public Transport Netw ork Operations Grant [Schedule 5B] – – 75,518 – – – – – – Water Serv ices Infrastructure Grant – – – – – – – – –

Provincial Government: – – – – – – – – –

District Municipality: – – – – – – – – –

Other grant providers: – – 3,242 – – – – – – Limpopo Roads Agency – – – – – – – – – Unspecified – – 3,242 – – – – – – Total Capital Transfers and Grants 5 – – 447,022 536,992 604,414 604,414 582,682 622,246 677,727 TOTAL RECEIPTS OF TRANSFERS & GRANTS – – 1,213,699 1,278,053 1,346,530 1,346,530 1,316,243 1,419,007 1,552,187

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Tariff-setting is a pivotal and strategic part of the compilation of any budget. When rates, tariffs and other charges were revised, wage agreements with unions once the new agreement is available (Labour), input costs of services provided by the City, local economic conditions and the affordability of services taking into consideration the City’s indigent policy were taken into consideration. There will be a significant increase to the consumers during 2019/2020 as the electricity tariffs are estimated to increase to 12.9 percent from 7.82 percent in 2018/2019 subject to approval by National Energy Regulator of South Africa (NERSA).

SembCorp (Silulumanzi) Water bulk tariffs are far beyond the mentioned inflation target. Given that these tariff increases are determined by external agencies, the impact they have on the City’s electricity and in these tariffs are largely outside the control of the City. Discounting the impact of these price increases in lower consumer tariffs will erode the City’s future financial position and viability.

It must also be appreciated that the consumer price index, as measured by CPI, is not a good measure of the cost increases of goods and services relevant to municipalities. The basket of goods and services utilised for the calculation of the CPI consist of items such as food, petrol and medical services, whereas the cost drivers of a City are informed by items such as the cost of remuneration, bulk purchases of electricity and water, petrol, diesel, chemicals, cement etc. The current challenge facing the City is managing the gap between cost drivers and tariffs levied, as any shortfall must be made up by either operational efficiency gains or service level reductions.

Overall impact of tariff increases on households

The following table shows the overall expected impact of the tariff increases on a large and small household, as well as an indigent household receiving free basic services.

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MP326 City of Mbombela - Supporting Table SA14 Household bills 2019/20 Medium Term Revenue & Expenditure 2015/16 2016/17 2017/18 Current Year 2018/19 Framework Description Ref Audited Audited Audited Original Adjusted Full Year Budget Year Budget Year Budget Year Budget Year Outcome Outcome Outcome Budget Budget Forecast 2019/20 2019/20 +1 2020/21 +2 2021/22 Rand/cent % incr. Monthly Account for Household - 'Middle 1 Income Range' Rates and services charges: Property rates 344.20 344.20 344.20 344.20 6.0% 364.85 384.55 405.32 Electricity : Basic lev y – – – – – – – – Electricity : Consumption 1,500.56 1,602.60 1,602.60 1,602.60 15.6% 1,809.33 1,907.03 2,010.01 Water: Basic lev y 101.95 108.88 108.88 108.88 5.9% 115.31 121.54 128.10 Water: Consumption 501.72 528.31 528.31 528.31 5.9% 559.48 589.69 621.53 Sanitation 161.64 170.21 170.21 170.21 5.9% 180.25 189.98 200.24 Refuse remov al 177.14 186.53 186.53 186.53 5.9% 197.53 208.20 219.44 Other – sub-total – – 2,787.20 2,940.72 2,940.72 2,940.72 9.7% 3,226.75 3,400.99 3,584.65 VAT on Serv ices Total large household bill: – – 2,787.20 2,940.72 2,940.72 2,940.72 9.7% 3,226.75 3,400.99 3,584.65 % increase/-decrease – – 5.5% – – 9.7% 5.4% 5.4%

Monthly Account for Household - 'Affordable 2 Range' Rates and services charges: Property rates 233.17 233.17 233.17 233.17 6.0% 247.16 260.51 274.57 Electricity : Basic lev y – – Electricity : Consumption 648.81 692.93 692.93 692.93 12.9% 782.32 824.56 869.09 Water: Basic lev y 101.95 107.36 107.36 107.36 5.9% 113.69 119.83 126.30 Water: Consumption 397.19 418.24 418.24 418.24 5.9% 442.92 466.84 492.05 Sanitation 161.64 170.21 170.21 170.21 5.9% 180.25 189.98 200.24 Refuse remov al 118.62 124.90 124.90 124.90 5.9% 132.27 139.42 146.94 Other – sub-total – – 1,661.38 1,746.81 1,746.81 1,746.81 8.7% 1,898.61 2,001.13 2,109.20 VAT on Serv ices Total small household bill: – – 1,661.38 1,746.81 1,746.81 1,746.81 8.7% 1,898.61 2,001.13 2,109.20 % increase/-decrease – – 5.1% – – 8.7% 5.4% 5.4% - - -1.00 -

1.5 OPERATING EXPENDITURE FRAMEWORK

The City’s expenditure framework for the 2019/2020 budget and MTREF is informed by the following:

Balanced budget constraint (operating expenditure should not exceed operating revenue) unless there are existing uncommitted cash-backed reserved to fund any deficit;

(a) Funding of the budget over the medium-term as informed by Section 18 and 19 of the MFMA; (b) The capital program is aligned to the IDP priorities; (c) Operational gains and efficiencies will be directed to funding the capital budget and other core services; and (d) Strict adherence to the principle of no project plans no budget. If there is no business plan no funding allocation can be made.

The following table is a high level summary of the 2019/2020 budget and MTREF (classified per main type of operating expenditure);

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MP326 City of Mbombela - Table A4 Budgeted Financial Performance (revenue and expenditure) Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 2019/20 Medium Term Revenue & Budget Budget Budget Audited Audited Audited Original Adjusted Full Year Pre-audit R thousand 1 Year Year +1 Year +2 Outcome Outcome Outcome Budget Budget Forecast outcome 2019/20 2020/21 2021/22 Expenditure By Type Employee related costs 2 – – 793,706 887,762 890,762 890,762 890,762 1,010,483 1,075,118 1,146,614 Remuneration of councillors – – 38,422 41,696 41,696 41,696 41,696 43,865 46,277 48,822 Debt impairment 3 – – 160,305 143,664 133,010 133,010 133,010 106,974 112,975 119,321 Depreciation & asset impairment 2 – – 502,874 540,557 540,557 540,557 540,557 545,585 595,964 625,762 Finance charges – – 66,272 40,039 43,419 43,419 43,419 45,677 48,144 50,743 Bulk purchases 2 – – 706,812 736,187 729,119 729,119 729,119 839,462 906,289 978,386 Other materials 8 – – 46,715 55,567 45,300 45,300 45,300 54,212 49,875 45,885 Contracted services – – 518,854 473,762 495,510 495,510 495,510 406,824 362,928 341,435 Transfers and subsidies – – 31,912 35,310 28,750 28,750 24,643 32,670 34,580 36,734 Other expenditure 4, 5 – – 240,049 255,735 245,667 245,667 245,667 164,175 147,038 132,334 Loss on disposal of PPE – – 3,548 – – – – – – – Total Expenditure – – 3,109,470 3,210,279 3,193,790 3,193,790 3,189,683 3,249,926 3,379,187 3,526,037

Employee Related Cost

The employee’s remuneration cost will amount to R1 billion 2019/20120 and this has also taken into account the provision as per the labour agreement between employer and labour.. The remuneration cost to the total operating expenditure budget is 31 and in line with acceptable standards and norms as per National Treasury circulars. The employees remuneration cost will increase to R1.1 billion in 2020/2021 and R1.15 billion in 2021/2122 respectively.

Councillor’s Remuneration

Councilor’s remuneration will amount to R44 million in 2019/2020 financial year indicating a 5 percent increase compared to R43 million in 2018/2019 it will further increase to R46 million and R49 million respectively in 2020/2021 and 2021/2022. This constitutes 1 percent to the total operating expenditure budget.

Bulk Purchases

The bulk purchase expenditure is mainly expenditure for bulk electricity purchase from Eskom and the bulk water purchase and will increase to R839 million in 2019/2020 due to an average increase of 15.63 percent granted to Eskom by the National Energy Regulator of South Africa, the increase will come into effect from 01 July 2019 and bulk water increase of 7.4 percent. The bulk purchase expenditure makes up 25 percent of the total operating expenditure budget.

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Depreciation

The depreciation cost will be R546 million which makes up 17 percent of the total operating expenditure and is about 7 percent of the total assets carrying value of R7 966 billion. The depreciation costs represent the rate at which the assets of the municipality are utilized in rendering services and therefore the cost should be provided for/included on the budget to ensure the current ratepayers and users of the municipal services are able to contribute towards the refurbishment, upgrade and renewal of the assets.

Contracted Services

Contracted services will decrease by 14 percent or R86 million from R495 million in 2018/2019 to R407 million in 2019/2020 in response to the call to reduce cost of running the city using external service providers in non - specialised services than utilising our own labour force this accounts for 14 percent of the total operating expenditure budget

Other Expenditure

Other Expenditure will decrease by 34 percent or 83 million from R246 million to 164 million in 2019/2020 financial year which makes up 5 percent of the total operating budget it will further decrease to R131 million over the medium term the huge proposed decrease is due to implementation of the cost curtailment measures applied in line with National Treasury directives

Debt Impairment

Dept impairment will decrease by R73 million or 20 percent to R106 million in 2019/2020 from R133 million in 2018/2019 this represents 3 percent of the total operating expenditure. The City projected to collect 90 per cent of projected revenue on the current account and a provision of 5 per cent is doubtful to be collected during the 2019/2020 period.

2019/2020 to 2021/2022 Special IDP Project

Included on this expenditure items is IDP operating projects amounting to R105 million in 2019/2020 financial year and decrease to R87 million in 2020/2021 financial year, and R79 million in 2021/2122. The breakdown of the total expenditure for operating projects per municipal priorities is as tabulated below;

Furthermore a detailed breakdown of the opex budget per project over the medium-term – Referred as Annexure 484/2019 on the council resolutions.

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2019/2020 TO 2021/2022 FINAL OPERATING PROJECTS FOR THE CITY OF MBOMBELA MUNICIPALITY DEPARTMENT CATERGORY MUNICIPAL PRIORITY DESCRIPTION 2020/2021 2020/2021 2021/2022 BUDGET BUDGET BUDGET ESTIMATE FORECAST FORECAST CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES COMMUNITY DEVELOPMENT TEKWANE HUB TOWNSHIP ESTABLISHMENT R 3,839,872 R 3,263,891 R 2,937,502 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES RURAL DEVELOPMENT SUPPORT FOR RURAL CO-ORPERATIVE R 250,000 R 212,500 R 191,250 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES COMMUNITY DEVELOPMENT INSTALLATION OF SOLAR GEYSERS R 1,000,000 R 850,000 R 765,000 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT PURCHASE OF DESTINATION MARKETING MATER R 255,089 R 216,826 R 195,143 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT OPERATIONALISATION OF SPECIAL PROGRAMME R 1,700,000 R 1,445,000 R 1,300,500 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT COOPERATIVES SUPPORT R 425,000 R 361,250 R 325,125 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT SUPPORT FOR YOUTH ENTEPRISES R 595,000 R 505,750 R 455,175 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT TRANSFER OF MUNICIPAL PROPERTIES CR R 1,785,000 R 1,517,250 R 1,365,525 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT TRANSFER OF MUNICIPAL PROPERTIES SR R 595,000 R 505,750 R 455,175 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT TRANSFER OF MUNICIPAL PROPERTIES ER R 302,600 R 257,210 R 231,489 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT RELOCATE STAND BEACONS AND RESURVEYING R 108,800 R 92,480 R 83,232 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES GOOD GOVERNANCE DEVELOP STRATEGY PREVENT LAND INVASION R 238,000 R 202,300 R 182,070 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT IMPLEMENTATION OF GIS SYSTEM R 900,000 R 765,000 R 688,500 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT NKOSI CITY TOWNSHIP ESTABLISHMENT R 5,525,000 R 4,696,250 R 4,226,625 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT LAND USE MANAGEMENT SCHEME R 680,000 R 578,000 R 520,200 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES ECONOMIC DEVELOPMENT REVIEW OF SPATIAL DEVELOPMENT FRAMEWORK R 807,500 R 686,375 R 617,738 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES RURAL DEVELOPMENT CONSTRUCTION OF PIGGERY HOUSES R 400,000 R 340,000 R 306,000 CITY PLANNING & DEVELOPMENT CONTRACTED SERVICES RURAL DEVELOPMENT CONTR: BORE WATERHOLE DRILLING R 680,000 R 578,000 R 520,200 Sub -Total R 20,086,861 R 17,073,832 R 15,366,449 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT C&PS: B&A RESEARCH & ADVISORY R 595,000 R 505,750 R 455,175 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT 2010 LEGACY ANNUAL RECREATIONAL PROGRAM R 425,000 R 361,250 R 325,125 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT 2011 LEGACY ANNUAL RECREATIONAL PROGRAM R 73,409 R 62,397 R 56,158 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT CONTR: ARTISTS & PERFORMERS R 255,000 R 216,750 R 195,075 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT CONTR: SPORTS & RECREATION R 680,000 R 578,000 R 520,200 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT OS: CATERING SERVICES R 127,500 R 108,375 R 97,538 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT CONTR: STAGE & SOUND CREW R 42,500 R 36,125 R 32,513 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT CONTR: EVENT PROMOTERS R 212,500 R 180,625 R 162,563 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT C&PS: B&A HUMAN RESOURCES R 136,000 R 115,600 R 104,040 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT CONTR: EVENT PROMOTERS R 425,000 R 361,250 R 325,125 COMMUNITY SERVICES CONTRACTED SERVICES COMMUNITY DEVELOPMENT INVASIVE SPECIES CONTROL (WM) R 595,000 R 505,750 R 455,175 COMMUNITY SERVICES CONTRACTED SERVICES SOLID WASTE MANAGEMENT MAINTENANCE THEKWANE WES CWDS WEIGHBRID R 1,275,000 R 1,083,750 R 975,375 Sub -Total R 4,841,909 R 4,115,622 R 3,704,060 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE PEST CONTROL R 300,000 R 255,000 R 229,500 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE FACILITIES MAINTENANCE PLAN R 1,000,000 R 850,000 R 765,000 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE REFURBISHMENT OF CIVIC AND SERVICE CENTRE R 680,000 R 578,000 R 520,200 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE DISASTER REC BUSINESS CONTINUITY PLAN R 1,224,000 R 1,040,400 R 936,360 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE OS: TRANSPORT SERVICES R 425,000 R 361,250 R 325,125 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE C&PS: B&A HUMAN RESOURCES R 425,000 R 361,250 R 325,125 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE C&PS: B&A HUMAN RESOURCES R 170,000 R 144,500 R 130,050 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE OS: TRANSPORT SERVICES R 102,000 R 86,700 R 78,030 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE C&PS: B&A HUMAN RESOURCES R 408,000 R 346,800 R 312,120 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE EMPLOYEE WELLNESS PROGRAMS R 510,000 R 433,500 R 390,150 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE SKILLS AUDIT R 850,000 R 722,500 R 650,250 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE MEDICAL SURVEILLANCES OF EMPLOYEES R 418,200 R 355,470 R 319,923 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE QUALIFICATION AUDIT R 408,000 R 346,800 R 312,120 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE TRAINING (SKILLS DEVELOPMENT) R 4,250,000 R 3,612,500 R 3,251,250 CORPORATE SERVICES CONTRACTED SERVICES GOOD GOVERNANCE EVENTS PROMOTER( LONG SERVICE AWARDS) R 1,360,000 R 1,156,000 R 1,040,400 Sub -Total R 12,530,200 R 10,650,670 R 9,585,603

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COUNCIL CONTRACTED SERVICES GOOD GOVERNANCE RELIGIOUS AND CULTURAL ACTIVITIES OR EV R 2,235,500 R 1,900,175 R 1,710,158 COUNCIL CONTRACTED SERVICES GOOD GOVERNANCE COUNCIL CLOSING CEREMONY R 816,000 R 693,600 R 624,240 Sub -Total R 3,051,500 R 2,593,775 R 2,334,398 DEPUTY MUNICIPAL MANAGER - AUXILLIARYCONTRACTED SERVICES GOOD GOVERNANCE METRO STATUS R 2,000,000 R - R - DEPUTY MUNICIPAL MANAGER - AUXILLIARYCONTRACTED SERVICES GOOD GOVERNANCE DEVELOPMENT OF ENVIRONMENTAL MANAGEMENT R 633,250 R 538,263 R 484,436 DEPUTY MUNICIPAL MANAGER - AUXILLIARYCONTRACTED SERVICES GOOD GOVERNANCE MBOMBELA WETLANDS INVENTORY R 318,963 R 271,118 R 244,006 DEPUTY MUNICIPAL MANAGER - AUXILLIARYCONTRACTED SERVICES WATER SUPPLY OS: ALIEN VEGETATION CONTROL R 272,000 R 231,200 R 208,080 DEPUTY MUNICIPAL MANAGER - AUXILLIARYCONTRACTED SERVICES WATER SUPPLY C&PS: LAB SERV WATER R 1,360,000 R 1,156,000 R 1,040,400 Sub -Total R 4,584,213 R 2,196,581 R 1,976,923 ENERGY CONTRACTED SERVICES ELECTRICITY SUPPLY AND MANAGEMENT STREETLIGHTS MATERIALS R 204,000 R 173,400 R 156,060 ENERGY CONTRACTED SERVICES ELECTRICITY SUPPLY AND MANAGEMENT STREETLIGHTS MENTAINANCE R 2,805,000 R 2,384,250 R 2,145,825 ENERGY CONTRACTED SERVICES ELECTRICITY SUPPLY AND MANAGEMENT CONTR: ELECTRICAL TRANSFORMERS R 586,500 R 498,525 R 448,673 ENERGY CONTRACTED SERVICES ELECTRICITY SUPPLY AND MANAGEMENT CONTR: ELECTRICAL R 964,750 R 820,038 R 738,034 ENERGY CONTRACTED SERVICES ELECTRICITY SUPPLY AND MANAGEMENT ELECTRICAL INFRASTRUCTURE MASTERPLAN R 1,275,000 R 1,083,750 R 975,375 ENERGY CONTRACTED SERVICES ELECTRICITY SUPPLY AND MANAGEMENT ELECTRICAL SERVICES PLANNING CAPACITY C R 1,105,000 R 939,250 R 845,325 Sub -Total R 6,940,250 R 5,899,213 R 5,309,291 FINANCIAL SERVICES CONTRACTED SERVICES GOOD GOVERNANCE INTERPRETATION/TRANSLATION OF DOCUMENTS R 200,000 R - R - FINANCIAL SERVICES CONTRACTED SERVICES FINANCIAL VIABILITY UPDATE AND MAINTENANCE OF ASSET REGISTE R 4,304,813 R 3,659,091 R 3,293,182 FINANCIAL SERVICES CONTRACTED SERVICES FINANCIAL VIABILITY UPDATE OF THE GENERAL VALUATION ROLL R 1,955,000 R 1,661,750 R 1,495,575 FINANCIAL SERVICES CONTRACTED SERVICES FINANCIAL SERVICES IMPL ACTIVITY BASED COSTING (WM) R 2,781,373 R 2,364,167 R 2,127,750 FINANCIAL SERVICES CONTRACTED SERVICES FINANCIAL VIABILITY BILLING DATA CLEANSING (WM) R 2,000,000 R 1,700,000 R 1,530,000 FINANCIAL SERVICES CONTRACTED SERVICES FINANCIAL VIABILITY IMPL OF REVENUE ENHANCE STRATEGY (WM R 3,261,178 R 2,772,001 R 2,494,801 FINANCIAL SERVICES CONTRACTED SERVICES FINANCIAL VIABILITY IMPL OF REVENUE ENHANCE STRATEGY (WM) R 1,096,500 R 932,025 R 838,823 FINANCIAL SERVICES CONTRACTED SERVICES FINANCIAL VIABILITY COMPILATION OF PROPERTY VALUATION ROLL R 2,125,000 R 1,806,250 R 1,625,625 FINANCIAL SERVICES CONTRACTED SERVICES FINANCIAL VIABILITY C&PS: B&A BUSINESS & FIN MANAGEMENT R 340,000 R 289,000 R 260,100 FINANCIAL SERVICES CONTRACTED SERVICES GOOD GOVERNANCE COMPILATION OF COMMITMENT REGISTER R 1,263,950 R 1,074,358 R 966,922 FINANCIAL SERVICES CONTRACTED SERVICES FINANCIAL VIABILITY IMPL SEAMLESS INTEGRATED HR & PAYROLL R 340,000 R 289,000 R 260,100 Sub -Total R 19,667,814 R 16,547,642 R 14,892,877 OFFICE OF COUNCIL CONTRACTED SERVICES GOOD GOVERNANCE KNOW YOUR CITY SCHOOLS PROJECT R 1,904,000 R 1,618,400 R 1,456,560 Sub -Total R 1,904,000 R 1,618,400 R 1,456,560 PUBLIC SAFETY CONTRACTED SERVICES GOOD GOVERNANCE HOSTING OF IMPS-SA EVENT R 600,000 R - R - PUBLIC SAFETY CONTRACTED SERVICES PUBLIC SAFETY SPCA PROGRAMME R 850,000 R 722,500 R 650,250 PUBLIC SAFETY CONTRACTED SERVICES PUBLIC SAFETY CONTR: FIRE PROTECTION R 273,447 R 232,430 R 209,187 PUBLIC SAFETY CONTRACTED SERVICES PUBLIC SAFETY OS: SECURITY SERVICES R 1,275,000 R 1,083,750 R 975,375 Sub -Total R 2,998,447 R 2,038,680 R 1,834,812 PUBLIC WORKS & TRANSPORT CONTRACTED SERVICES WATER SUPPLY MUNICIPAL INFRASTRUCTURE OPERATIONAL PROGRAMME R 2,000,000 R 2,000,000 R 2,000,000 PUBLIC WORKS & TRANSPORT CONTRACTED SERVICES ROADS INFRASTRUCTURE DEVELOPMENT ANDCONTR: STORMWATER MAINTENANCE OF UNSPECIFIED ASSETS R 19,550,000 R 16,617,500 R 14,955,750 PUBLIC WORKS & TRANSPORT CONTRACTED SERVICES ROADS INFRASTRUCTURE DEVELOPMENT ANDCONTR: STORMWATER MAINT OF BUILDINGS & FACILITIES R 446,242 R 379,306 R 341,375 PUBLIC WORKS & TRANSPORT CONTRACTED SERVICES ROADS INFRASTRUCTURE DEVELOPMENT ANDOPERATIONALISATION STORMWATER OF THE INTEGRATED PU R 1,311,040 R 1,114,384 R 1,002,946 PUBLIC WORKS & TRANSPORT CONTRACTED SERVICES ROADS INFRASTRUCTURE DEVELOPMENT ANDDEVELOP STORMWATER STORM WATER MASTER PLAN R 425,000 R 361,250 R 325,125 PUBLIC WORKS & TRANSPORT CONTRACTED SERVICES ROADS INFRASTRUCTURE DEVELOPMENT ANDDETERMINE STORMWATER 1:100 YEAR FLOOD LINES R 170,000 R 144,500 R 130,050 PUBLIC WORKS & TRANSPORT CONTRACTED SERVICES ROADS INFRASTRUCTURE DEVELOPMENT ANDROADS STORMWATER MASTER PLAN R 425,000 R 361,250 R 325,125 Sub -Total R 24,327,282 R 20,978,190 R 19,080,371 WATER & SANITATION CONTRACTED SERVICES WATER & SANITATION SECTION 78 ASSESSMENT FOR WATER SERVICE R 382,500 R 325,125 R 292,613 WATER & SANITATION CONTRACTED SERVICES WATER & SANITATION OS: METER MANAGEMENT R 971,428 R 825,714 R 743,143 WATER & SANITATION CONTRACTED SERVICES WATER SUPPLY DEVELOP WATER & SANITATION MAINTAIN PLA R 413,458 R 351,439 R 316,295 WATER & SANITATION CONTRACTED SERVICES WATER SUPPLY DEVELOP WATER & SANITATION MAINTAIN PLA R 413,458 R 351,439 R 316,295 WATER & SANITATION CONTRACTED SERVICES WATER SUPPLY MASTER PLAN & BUREAU SERVICE W&S R 1,127,780 R 958,613 R 862,752 WATER & SANITATION CONTRACTED SERVICES WATER SUPPLY MASTER PLAN & BUREAU SERVICE W&S R 1,127,780 R 958,613 R 862,752 Sub -Total R 4,436,404 R 3,770,944 R 3,393,849

TOTAL OPERATING PROJECTS R 105,368,879 R 87,483,547 R 78,935,193

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The breakdown of the total expenditure for operating projects per municipal per municipal priorities is as tabulated below;

2019/202 TO 2021/2022 OPERATIONAL PROJECTS PER DEPARTMENT

DEPARTMENT 2020/2021 2020/2021 2021/2022 BUDGET BUDGET BUDGET ESTIMATE FORECAST FORECAST CITY PLANNING & DEVELOPMENT R 20,086,861 R 17,073,832 R 15,366,449 COMMUNITY DEVELOPMENT R 4,839,872 R 4,113,891 R 3,702,502 ECONOMIC DEVELOPMENT R 13,678,989 R 11,627,141 R 10,464,427 GOOD GOVERNANCE R 238,000 R 202,300 R 182,070 RURAL DEVELOPMENT R 1,330,000 R 1,130,500 R 1,017,450 COMMUNITY SERVICES R 4,841,909 R 4,115,622 R 3,704,060 COMMUNITY DEVELOPMENT R 3,566,909 R 3,031,872 R 2,728,685 SOLID WASTE MANAGEMENT R 1,275,000 R 1,083,750 R 975,375 CORPORATE SERVICES R 12,530,200 R 10,650,670 R 9,585,603 GOOD GOVERNANCE R 12,530,200 R 10,650,670 R 9,585,603 COUNCIL R 3,051,500 R 2,593,775 R 2,334,398 GOOD GOVERNANCE R 3,051,500 R 2,593,775 R 2,334,398 DEPUTY MUNICIPAL MANAGER - AUXILLIARY R 4,584,213 R 2,196,581 R 1,976,923 GOOD GOVERNANCE R 2,952,213 R 809,381 R 728,443 WATER SUPPLY R 1,632,000 R 1,387,200 R 1,248,480 ENERGY R 6,940,250 R 5,899,213 R 5,309,291 ELECTRICITY SUPPLY AND MANAGEMENT R 6,940,250 R 5,899,213 R 5,309,291 FINANCIAL SERVICES R 19,667,814 R 16,547,642 R 14,892,877 FINANCIAL SERVICES R 2,781,373 R 2,364,167 R 2,127,750 FINANCIAL VIABILITY R 15,422,491 R 13,109,117 R 11,798,206 GOOD GOVERNANCE R 1,463,950 R 1,074,358 R 966,922 OFFICE OF COUNCIL R 1,904,000 R 1,618,400 R 1,456,560 GOOD GOVERNANCE R 1,904,000 R 1,618,400 R 1,456,560 PUBLIC SAFETY R 2,998,447 R 2,038,680 R 1,834,812 GOOD GOVERNANCE R 600,000 R - R - PUBLIC SAFETY R 2,398,447 R 2,038,680 R 1,834,812 PUBLIC WORKS & TRANSPORT R 24,327,282 R 20,978,190 R 19,080,371 ROADS INFRASTRUCTURE DEVELOPMENT AND STORMWATERR 22,327,282 R 18,978,190 R 17,080,371 WATER SUPPLY R 2,000,000 R 2,000,000 R 2,000,000 WATER & SANITATION R 4,436,404 R 3,770,944 R 3,393,849 WATER & SANITATION R 1,353,928 R 1,150,839 R 1,035,755 WATER SUPPLY R 3,082,476 R 2,620,104 R 2,358,094 Grand Total R 105,368,879 R 87,483,547 R 78,935,193

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Cost of Free Basic Services (Formal Settlement)

The City has approved an indigent register finalised in line with the approved indigent policy. The City has allocated an amount of R123 million in the 2019/2020 financial year for provision of free basic services. The following free basic services will be provided in accordance with the criteria set on the indigent policy of the City.

COST OF FREE BASIC SERVICES FOR THE CITY OF MBOMBELA COST OF FREE BASIC SERVICES 2018/2019 Adjusted 2019/1920 1920/1921 2022/1923 Budget

Water (kilolitres per household per month) R 46,308,911 R 46,308,911 R 48,624,357 R 51,055,574 R 53,608,353 Sanitation (Rand per household per month) R 14,368,911 R 14,368,911 R 12,187,473 R 13,052,783 R 13,966,478 Electricity (kwh per household per month) R 45,040,723 R 45,040,723 R 47,292,759 R 49,657,397 R 52,140,267 Refuse (average litres per week) R 14,009,404 R 14,009,404 R 14,709,874 R 15,445,368 R 16,217,636 Total will be R 119,727,949 R119,727,949 R 122,814,462 R 129,211,122 R 135,932,734

Cost of Free Basic Services (informal Settlement)

Furthermore, the City provide free basic service to informal settlements while processes to formalize some of the areas is still underway. The table below provide cost of free basic services to informal settlements.

COST OF FREE BASIC SERVICES (INFORMAL SETTLEMENT) COST OF FREE BASIC SERVICES 2018/2019 Adjusted 2019/1920 1920/1921 2022/1923 Budget

Water (kilolitres per household per month) R 31,940,000 R 31,940,000 R 33,537,000 R 35,213,850 R 36,974,543 Sanitation (Rand per household per month) R - R - R - R - R - Electricity (kwh per household per month) R 40,067,900 R 40,067,900 R 42,071,295 R 42,912,721 R 43,770,975 Refuse (average litres per week) R 2,500,000 R 2,625,000 R 2,887,500 R 3,176,250 R 3,493,875 TOTAL COST 74,507,900 74,632,900 78,495,795 81,302,821 84,239,393

During the compilation of the 2018/2019 MTREF, operational repairs and maintenance was identified as a strategic imperative owing to the ageing of the City’s infrastructure and historic deferred maintenance. To this end, the City is still having a challenge in separating the portion of employee related cost for repairs and maintenance; as a result this allocation is part of the overall employee related cost for council.

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Repairs and Maintenance for the City’s assets

The table below provides a breakdown of the repairs and maintenance in relation to asset class: MP326 City of Mbombela - Table A9 Asset Management Budget Budget Budget Audited Audited Audited Original Adjusted Full Year R thousand Year Year +1 Year +2 Outcome Outcome Outcome Budget Budget Forecast 2019/20 2020/21 2021/22 Roads Infrastructure – – 70,894 78,771 78,771 78,771 84,587 98,433 110,797 Storm water Infrastructure – – 10,563 11,736 11,736 11,736 12,310 12,435 25,569 Electrical Infrastructure – – 8,995 14,756 8,648 8,648 21,501 20,467 19,831 Water Supply Infrastructure – – 41,657 46,046 45,756 45,756 40,905 52,358 53,918 Sanitation Infrastructure – – 26,253 28,059 27,959 27,959 30,700 33,506 35,389 Solid Waste Infrastructure – – 35,620 4,154 3,154 3,154 21,330 34,173 46,069 Rail Infrastructure – – 1 223 140 140 196 181 166 Information and Communication Infrastructure – – – 380 247 247 323 275 247 Infrastructure – – 193,983 184,126 176,411 176,411 211,853 251,826 291,985 Community Facilities – – 9,448 10,498 11,154 11,154 47,494 48,832 54,767 Sport and Recreation Facilities – – 13,099 14,555 14,555 14,555 2,502 2,502 2,502 Community Assets – – 22,547 25,053 25,709 25,709 49,996 51,334 57,269 Operational Buildings – – 13,588 15,098 15,098 15,098 24,884 25,117 26,616 Other Assets – – 13,588 15,098 15,098 15,098 24,884 25,117 26,616 Machinery and Equipment – – 2,845 3,161 250 250 8,639 8,892 9,382 Transport Assets – – 23,550 26,166 26,166 26,166 11,208 15,317 11,943 Repairs and Maintenance by Asset Class 3 – – 256,513 253,604 243,634 243,634 306,579 352,485 397,195

For the 2019/2020 financial year 69 percent or (R211 million) of total repairs and maintenance by asset class will be spent on infrastructure assets. Roads infrastructure has received a significant proportion of this allocation totaling 28 percent (R85 million), followed by Water supply 13 percent (R41 million), Electrical by 7 percent (R22 million), Community assets 15 percent (R47 million), Other assets is at 7 percent (R24 million), Sanitation and solid waste both taking an 17 percent each and Transport asset 3 percent (R11 million).

Below is the graphic illustration on repairs and maintenance by asset class;

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Free basic services: basic social services package

The social package assists households that are poor or face other circumstances that limit their ability to pay for services. To receive these free services the households are required to register in terms of the City’s approved Indigent Policy. The target is to register 11 906 or more indigent households during the 2019/2020 financial year, a process reviewed annually. Details relating to free services, cost of free basis services, revenue lost owing to free basic services as well as basic service delivery measurement are contained in Table A10 (Basic Service Delivery Measurement).

The cost of the social package of the registered indigent households is largely financed by national government through the local government equitable share received in terms of the annual Division of Revenue Act.

Cost of free basic services medium term is tabulated on the table below.

COST OF FREE BASIC SERVICES FOR THE CITY OF MBOMBELA COST OF FREE BASIC SERVICES 2018/2019 Adjusted 2019/1920 1920/1921 2022/1923 Budget

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1.6 CAPITAL EXPENDITURE

The table below depicts a summary of the allocations per municipal priority on the capital expenditure budget; 2019/2020 TO 2021/2022 CAPITAL BUDGET PER MUNICIPAL PRIORITY

MUNICIPAL PRIORITY BUDGET BUDGET BUDGET ESTIMATES ESTIMATES ESTIMATES 2019/2020 2020/2021 2021/2022 Community Development R 45,250,324 R 23,892,160 R 14,500,000 Community Services R 8,900,000 R 8,000,000 R 9,500,000 Office of Council R 150,000 R - R - Public Work Road and Transport R 36,200,324 R 15,892,160 R 5,000,000 Economic Development R 3,000,000 R 5,000,000 R - City Planning and Development R 3,000,000 R 5,000,000 R - Electricity Supply and Management R 47,510,000 R 53,700,000 R 46,200,000 Energy R 47,510,000 R 53,700,000 R 46,200,000 Electrification R 4,000,000 R 12,000,000 R 15,000,000 Energy R 4,000,000 R 12,000,000 R 15,000,000 Financial Viability R 14,000,000 R - R - Financial Management R 14,000,000 R - R - Good Governance R 25,300,000 R 25,000,000 R 26,000,000 Corporate Services R 23,500,000 R 25,000,000 R 26,000,000 Regional Centre Co-ordination R 1,800,000 R - R - Mbombela Stadium Prencinct development R 15,000,000 R 15,000,000 R 55,000,000 Public Work Road and Transport R 15,000,000 R 15,000,000 R 55,000,000 Public Participation R 130,000 R - R - Office of Council R 130,000 R - R - Public Safety R 200,000 R - R - Pubblic Safety R 200,000 R - R - Public Transport R 198,919,000 R 209,848,000 R 255,586,000 Public Work Road and Transport R 198,919,000 R 209,848,000 R 255,586,000 Roads Infrastructure Development and Stormwater R 181,150,000 R 224,505,840 R 214,141,000 City Planning and Development R 15,000,000 R 28,803,000 R 40,000,000 Public Work Road and Transport R 166,150,000 R 195,702,840 R 174,141,000 Sanitation/Sewerage R 30,229,083 R 23,000,000 R 20,000,000 Public Work Road and Transport R 19,729,083 R 20,000,000 R 20,000,000 Water And Sanitation R 10,500,000 R 3,000,000 R - Solid waste R 3,500,000 R 10,000,000 R 25,000,000 Public Work Road and Transport R 3,500,000 R 10,000,000 R 25,000,000 Water Supply R 114,173,593 R 95,000,000 R 100,000,000 Public Work Road and Transport R 33,173,593 R 32,000,000 R 10,000,000 Water And Sanitation R 81,000,000 R 63,000,000 R 90,000,000 Grand Total R 682,362,000 R 696,946,000 R 771,427,000

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(a) Public Transport Infrastructure budget allocation will be R664 million over the medium- term and the allocation for 2019/2020 is R199 million. Expansion of Chris Hani Road Kanyamazane is allocated an amount of R83 million over the medium term. The University Public Transport Precinct R40/D725 will continue and the budget allocated for the projects is R51 million over the medium term. The Upgrade of R40 road through Hazyview is allocated R36 million over the medium term. Upgrade of Tom Lawrence road Whiteriver has an allocation of R35 million over the medium term. Bosch street interchange has been allocated a budget of R30 million over the medium-term. Legogote Public transport facility is allocated R25 million over the medium term. Matsulu Public Transport facility is allocated R23 million. Kanyamazane Public transport facility is allocated R20 million.The upgrade of Rail Bridge over freidenheim road is allocated R20 million over the medium term the rest of the projects are part of the detailed capital budget Annexure.

(b) The allocation for Roads and storm water infrastructure over the medium-term will amount to R620 million and the allocation for 2019/2020 is R181 million. Upgrade of Luphisi Kabokweni and Plaston Road has been allocated a budget of R84 million over the medium-term. Upgrade of gravel to interlocking paving within Umjindi areas is allocated R25 million over the medium term. Construction of Salubindza bus route has been allocated R22 million over the medium term. Construction of Masinga to Entokozweni bus route is allocated R20 million over the medium term. Construction of Nkululeko Circuit Street has an allocation of R18.5 million over the medium term. All the following projects are allocated R17 million each over the medium term; Construction of Siphumelele to Mphatseni bus route, Upgrade of Ka-Nkambule to Ka- Mkeyi bus route, Upgrade of Zamokuhle bus route, Upgrade of Lungisani Secondary School to Mdumiseni Primary School and Construction of Bermuda road.

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medium term. Provision of Nsikazi South Bulk Water supply Scheme phase 2 (Electrical Mechanic works) has been allocated an amount of R36 million over the medium term. The construction of the Karino/Nsikazi South Bulk Water supply Scheme phase 2 (OMO reservoir) remains a priority and an amount of R29 million is allocated. Matsulu water treatment works refurbishment is allocated an amount of R28 million over the medium term. Phumlani water scheme has been allocated an amount of R28 million over the medium term and Nsikazi north bulk water scheme is budgeted for R20 million over the medium term, the rest of the projects are part of the detailed capital budget Annexure.

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Highlights on some of the projects the City will undertake per service

Electrification of 100 Households at Emjindini Trust

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Paving of Road at Kanyamazane

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Shackleton Road

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This are some the capital projects the City is currently implementing in 2018/2019 financial period and some are already completed. The City will continue to fast track the implementation of capital budget so as to ensure that service delivery to the public continues.

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Furthermore a detailed breakdown of the capital budget per project over the medium-term – Referred as Annexure 483/2019 on the council resolutions. ANNEXURE 483/2019 2019/2020 TO 2021/2022 FINAL CAPITAL BUDGET FOR THE CITY OF MBOMBELA MUNICIPALITY IDP NUMBER DEPARTMENT PROJECT DESCRIPTION SOURCE OF FUNDING MUNICIPAL PRIORITY LOCATION WARD BUDGET BUDGET BUDGET ESTIMATES ESTIMATES ESTIMATES 2019/2020 2020/2021 2021/2022 Retrofitting of existing public Grant - Energy Efficiency and Demand Electricity Supply and Management Mbombela All R 8,000,000 R - R - CoM126 Energy lighting fittings with new LED Side Management Sub-Total EEDSM R 8,000,000 R - R - Ext 17 Switching Station Grant - Integrated National Electrification Electricity Supply and Management Umjindi Ext 17 41,42,43,44,4 R 6,000,000 R 8,000,000 R 8,000,000 CoM137 Energy Programme 5 132kv/122/11 40mva Grant - Integrated National Electrification Electricity Supply and Management Umjindi 41,42,43,44,4 R 5,169,965 R 8,000,000 R 8,000,000 Programme 5 CoM138 Energy 132kv Msholozi (Mbombela) Bulk Grant - Integrated National Electrification Electricity Supply and Management Msholozi 14 R 4,500,000 R 2,510,000 R 2,510,000 Supply Programme CoM139 Energy Electrification of Emjindini Trust Grant - Integrated National Electrification Electricity Supply and Management Emjindini Trust 41 R 1,620,005 R 1,620,000 R 1,620,000 (Umjindini) (100 households) Programme CoM140 Energy Electrification Ext 17 (100 Grant - Integrated National Electrification Electricity Supply and Management Umjindi Ext 17 45 R 1,620,005 R 1,620,000 R 1,620,000 households) Programme CoM141 Energy Electrification of Msholozi (400 Grant - Integrated National Electrification Electricity Supply and Management Msholozi 14 R 6,480,020 R 4,480,000 R 4,480,000 CoM142 Energy households) Programme CoM143 Energy Electrification Thekwane South Grant - Integrated National Electrification Electricity Supply and Management Tekwane South 18 R - R 750,000 R 750,000 Electrification Noordkaap (100 ProgrammeGrant - Integrated National Electrification Electricity Supply and Management Noordkaap 43 R - R 700,000 R 700,000 CoM144 Energy households) Programme Electrification of malubane (100 Grant - Integrated National Electrification Electricity Supply and Management Malubane 43 R - R 700,000 R 700,000 CoM145 Energy households) Programme Electrification of Matsafeni (100 Grant - Integrated National Electrification Electricity Supply and Management Matsafeni 14 R 1,620,005 R 1,620,000 R 1,620,000 CoM146 Energy housholds) Programme CoM147 Energy Mbombela Infills - 15 Households Grant - Integrated National Electrification Electricity Supply and Management R - R - R - Sub - Total INEP Programme R 27,010,000 R 30,000,000 R 30,000,000 CoM019 Public Work Road and Construction of Jerusalema communityGrant hall - Municipal Infrastructure Grant Community Development Jerusalema 8 R 3,000,000 R 6,000,000 R - TransportCity Planning and Construction of New informal Grant - Municipal Infrastructure Grant Economic Development Hazyview,Barberto 1,41,14,15 R 3,000,000 R 5,000,000 CoM155 Development Trade Stalls n and N4 Road R - Public Work Road and Construction of Jericho Grant - Municipal Infrastructure Grant Roads Infrastructure Development Jericho 23 R 3,000,000 R - R - CoM020 Transport Pedestrian bridge and Stormwater Public Work Road and Construction of Mganduzweni Grant - Municipal Infrastructure Grant Roads Infrastructure Development Mganduzweni 9 R 3,000,000 R - R - CoM021 Transport pedestrian bridge and Stormwater Public Work Road and Construction of Sibhulo Grant - Municipal Infrastructure Grant Roads Infrastructure Development Gutshwa 31 R 3,000,000 R - R - CoM022 Transport pedestrian bridge and Stormwater Public Work Road and Construction of Pedestrian Grant - Municipal Infrastructure Grant Roads Infrastructure Development Bhekiswayo 5 R 3,000,000 R - R - CoM023 Transport Bridges in Wards 5 Bhekiswayo and Stormwater Public Work Road and Construction of Nyongane/RDP Grant - Municipal Infrastructure Grant Roads Infrastructure Development Nyongane 39 R 3,000,000 R - R - CoM024 Transport Section pedestrian bridge and Stormwater Public Work Road and Construction of Shabalala Grant - Municipal Infrastructure Grant Roads Infrastructure Development Shabalala 1 R 3,000,000 R - R - CoM025 Transport Pedestrian bridge and Stormwater CoM026 Public Work Road and Entokozweni Sewer Reticulation Grant - Municipal Infrastructure Grant Sanitation/Sewerage Entokozweni 18 R 15,700,000 R 20,000,000 R 20,000,000 CoM027 TransportPublic Work Road and Upgrading of Masoyi Sports Grant - Municipal Infrastructure Grant Community Development Masoyi 6 R 10,000,000 R 6,892,160 R - TransportPublic Work Road and facilitiesUpgrade of gravel roads to Grant - Municipal Infrastructure Grant Roads Infrastructure Development Umjindi 41, 42, 43, 44 R 10,000,000 R 15,000,000 R - CoM028 Transport interlocking paving within Umjindi and Stormwater & 45 Public Work Road and Construction of Mgcobaneni bus Grant - Municipal Infrastructure Grant Roads Infrastructure Development Mgcobaneni 9 R 12,500,000 R - R - CoM029 Transport route and Stormwater Public Work Road and Construction of Mfuleni bus route Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 12,000,000 R - R - Mfuleni 28 CoM030 Transport and Stormwater Public Work Road and Construction of Hercules-Cessna Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 2,500,000 R - R - Kanyamazane 21 CoM031 Transport Street, Kanyamazane and Stormwater Public Work Road and Mphatseni to Siphumelele road Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 12,000,000 R 5,000,000 R - KaMphatseni 03 CoM032 Transport and Stormwater Public Work Road and LoveCorner to Cemetery road Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 7,000,000 R - R - Cemetery Road 04 CoM033 Transport and Stormwater Public Work Road and Mthonjeni-Mkhuhlu road upgrade Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 3,500,000 R - R - Kanyamazane 19 CoM034 Transport and Stormwater Public Work Road and Main road bus stop1 to Masinga- Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 8,000,000 R 12,000,000 R - Msogwaba 22 CoM035 Transport Ntokozweni road upgrade and Stormwater Public Work Road and Mountainview road upgrade Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 5,000,000 R 8,000,000 R - Mountain View 27 CoM036 Transport and Stormwater Public Work Road and Construction of Elandshoek N4 Grant - Municipal Infrastructure Grant Roads Infrastructure Development Elandshoek R 6,000,000 R 7,914,166 R - 12 CoM037 Transport Connection Access road and Stormwater Public Work Road and Construction of Zwelisha Grant - Municipal Infrastructure Grant Roads Infrastructure Development Zwelisha R 6,000,000 R 8,500,000 R 2,000,000 4 CoM038 Transport Bermuda road and Stormwater Public Work Road and Paving of road from Lungisani Grant - Municipal Infrastructure Grant Roads Infrastructure Development Chochocho R 4,500,000 R 12,000,000 R - Transport Secondary School to Mdumiseni and Stormwater 7 CoM039 Primary School Public Work Road and Paving of road from Clau- Clau Grant - Municipal Infrastructure Grant Roads Infrastructure Development Clau- Clau R 4,000,000 R 5,000,000 R - Transport Clinic via Mhwayi primary school and Stormwater 10 to Mbalekelwa station (link to CoM040 Gwalava road)

2019/2020 – 2021/2022 Approved Final Budget and Medium Term Revenue and Expenditure Framework Page 56

Public Work Road and Paving of road from Shabangu Grant - Municipal Infrastructure Grant Roads Infrastructure Development Clau Clau R 4,000,000 R 10,000,000 R - Transport street- Clau-Clau Clinic, and Stormwater 11 Mgwabaratsane bus route via CoM041 Ngobeni road & Vilakazi road via Public Work Road and Paving of Dwaleni (Sincobile) Grant - Municipal Infrastructure Grant Roads Infrastructure Development Dwaleni R 4,000,000 R 8,000,000 R - 32 CoM042 Transport Cemetery to the new cemetery and Stormwater Public Work Road and Paving of kaMabuza Halfway via Grant - Municipal Infrastructure Grant Roads Infrastructure Development Halfway R 4,650,000 R 9,788,674 R - 35 CoM043 Transport Matangaleni to Bhuga Cemetery and Stormwater Public Work Road and Elevation of the vehicle bridge and Grant - Municipal Infrastructure Grant Roads Infrastructure Development Emjindini Ext 11 R 4,000,000 R - R - Transport construction of a footbridge on the and Stormwater & 12 45 CoM044 road linking Ext.11 and Ext.12 Public Work Road and Paving of Inyoka Coner street - Grant - Municipal Infrastructure Grant Roads Infrastructure Development Thulane R 4,000,000 R 5,000,000 R - 13 CoM045 Transport Thulane and Stormwater Public Work Road and Grant - Municipal Infrastructure Grant Roads Infrastructure Development Msogwaba R 4,500,000 R 5,000,000 R - Paving of Tsila to Thithi road 29 CoM046 Transport and Stormwater Public Work Road and Grant - Municipal Infrastructure Grant Roads Infrastructure Development Salubindza R 2,000,000 R 5,000,000 R 15,000,000 Salubindza bus route 5 CoM047 Transport and Stormwater Public Work Road and Grant - Municipal Infrastructure Grant Roads Infrastructure Development Nkomeni R 3,000,000 R 6,000,000 R 5,000,000 MamRuby to Zwane market Road 2 CoM048 Transport and Stormwater Public Work Road and Grant - Municipal Infrastructure Grant Roads Infrastructure Development Nkomeni R 3,000,000 R 6,000,000 R - Nkomeni to Woboka bus route 2 CoM049 Transport and Stormwater Public Work Road and Grant - Municipal Infrastructure Grant Roads Infrastructure Development Nkomeni R 3,000,000 R 6,000,000 R - Nkomeni to Thembisa bus Route 2, 24 CoM050 Transport and Stormwater Public Work Road and Grant - Municipal Infrastructure Grant Roads Infrastructure Development Nkomeni R 3,000,000 R 5,000,000 R - Allice Gudlani bus Route 2 CoM051 Transport and Stormwater Public Work Road and Upgrading of Nkambule to Mkheyi Grant - Municipal Infrastructure Grant Roads Infrastructure Development Pienaar R 2,500,000 R 5,000,000 R 10,000,000 22 CoM052 Transport bus route and Stormwater Public Work Road and Grant - Municipal Infrastructure Grant Roads Infrastructure Development Pienaar R 2,000,000 R 5,000,000 R 10,000,000 Upgrading of Zamokuhle bus route 22 CoM053 Transport and Stormwater Public Work Road and Numbi ring road Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 2,000,000 R 4,000,000 R - Numbi 39 CoM054 Transport and Stormwater Public Work Road and Construction of Makoko Grant - Municipal Infrastructure Grant Community Development R 5,200,324 R - R - Makoko 34 CoM055 Transport Community Hall Public Work Road and Construction of Mbonisweni Grant - Municipal Infrastructure Grant Community Development R 6,000,000 R - R - Mbonisweni 38 CoM056 Transport Community Hall CoM057 Public Work Road and Construction of Numbi Community Grant - Municipal Infrastructure Grant Community Development Numbi 39 R 5,500,000 R - R - TransportPublic Work Road and HallConstruction of Chweni Grant - Municipal Infrastructure Grant Community Development R 3,500,000 Chweni 34 CoM058 Transport Community Hall Public Work Road and Provision Of Nsikazi South Via Grant - Municipal Infrastructure Grant Water Supply 2, 4, 18, 19, R 16,000,000 R 20,000,000 R - Transport Karino Bulk Water Supply Karino/Tekwane 20, 21, 22, Scheme Phase 2 (Mechanical and South 23, 24, 26, 29 CoM059 Electrical Works) & 40 CoM060 Public Work Road and Mattafin Outfall sewer Grant - Municipal Infrastructure Grant Sanitation/Sewerage Mattafin 14 R 4,029,083 R - R - TransportPublic Work Road and Provision Of Nsikazi South Via Grant - Municipal Infrastructure Grant Water Supply 10, 11, 31, R 17,173,593 R 12,000,000 R - Transport Karino Bulk Water Supply 32, 33, 34, Nsikazi South Scheme Phase 2 (OMO Reservoir 35, 36, 37 & CoM061 bulk water supply) 38 Water And Sanitation Nsikazi North Water Reticulation Grant - Municipal Infrastructure Grant Water Supply 1, 5, 6, 7, 9, R 10,000,000 R 15,000,000 R 35,000,000 Nsikazi North CoM013 Scheme 25, 39 Water And Sanitation Nsikazi South water reticulation Grant - Municipal Infrastructure Grant Water Supply 2, 4, 26, 33 R 10,000,000 R 15,000,000 R 35,000,000 Nsikazi South CoM014 scheme & 40 CoM015 Water And Sanitation Phumlani Water Scheme Grant - Municipal Infrastructure Grant Water Supply Phumlani 14 R 10,000,000 R 18,000,000 R 10,000,000 CoM016 Water And Sanitation Matsulu WTW Grant - Municipal Infrastructure Grant Water Supply Matsulu 13, 27, 28 R 8,000,000 R 10,000,000 R 10,000,000 Water And Sanitation Nsikazi North bulk Water Grant - Municipal Infrastructure Grant Water Supply R 20,000,000 R - R - 1, 3, 5, 6, 7, Nsikazi North 8, 9, 25 & 39 CoM017 Public Work Road and Mbombela Stadium Prencinct Grant - Municipal Infrastructure Grant Mbombela Stadium Prencinct R 15,000,000 R 15,000,000 R 55,000,000 Mataffin 14 CoM067 Transport development development CoM068 Public Work Road and Umjindi solid waste disposal site Grant - Municipal Infrastructure Grant Solid waste Umjindi 44 R 3,500,000 R 10,000,000 R 25,000,000 CoM069 TransportPublic Work Road and Matsulu Water Reticulation Grant - Municipal Infrastructure Grant Water Supply Matsulu 27 R - R - R 10,000,000 CoM070 TransportPublic Work Road and Upgrading of Matsulu stadium Grant - Municipal Infrastructure Grant Community Development Matsulu 28 R 3,000,000 R - R - CoM071 TransportPublic Work Road and phaseTV Mashonamini 2 pedestrian bridge Grant - Municipal Infrastructure Grant Community Development TV Nkomeni 11 R - R 3,000,000 R - TransportPublic Work Road and Khulani primary foot bridge Grant - Municipal Infrastructure Grant Community Development R - R - R 5,000,000 Jerusalema 8 CoM072 Transport (emaswazini) Public Work Road and Upgrading of Umnyama street Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 500,000 R - R 15,000,000 Tekatakho 32 CoM073 Transport and Stormwater

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Public Work Road and Construction of Esidungeni Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 8,500,000 Luphisi 24 CoM074 Transport Vehicle bridge and Stormwater Public Work Road and Upgrading of Masoyi Police station Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 10,000,000 Masoyi 6 CoM075 Transport to Dingindoda road and Stormwater Public Work Road and Upgrading of Pennywhistle and Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 5,500,000 Kanyamazane 20 CoM076 Transport Swan street-Kanyamazane and Stormwater Public Work Road and Upgrading of Mamindza Vehicle Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R 1,000,000 R 10,000,000 Msogwaba 26 CoM077 Transport bridge and Stormwater Public Work Road and Upgrading of Chakaza school Via Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 10,000,000 Chakaza school 36 CoM078 Transport Slinda road and Stormwater Public Work Road and Malekutu to Khumbula pedestrian Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 5,000,000 Malekutu 37 CoM079 Transport bridge and Stormwater Public Work Road and Dindela and spearville pedestrian Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 5,000,000 Spearville 44 CoM080 Transport bridge and Stormwater Public Work Road and Upgrading of Sakhele café road Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 5,000,000 Malekutu 37 CoM081 Transport and Stormwater Public Work Road and Newscom to Lindani pedestrian Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 5,000,000 Mganduzweni 8 CoM082 Transport bridge and Stormwater Public Work Road and Paving of Musa road Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 11,141,000 Makoko 34 CoM083 Transport and Stormwater Public Work Road and Upgrading of Mhlambanyatsi Road Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 3,000,000 Mahushu 3 CoM084 Transport and Stormwater Public Work Road and Upgrading of Mzamani Road Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 2,500,000 Kanyamazane 21 CoM085 Transport and Stormwater Public Work Road and Construction of Mazambaneni Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 3,500,000 Msogwwaba 29 CoM086 Transport Vehicle Bridge and Stormwater Public Work Road and Upgrading of Road from Khekhe to Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 5,000,000 Daantjie 23 CoM087 Transport Provincial Road and Stormwater Public Work Road and Upgrading of road from Marobotini Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 3,000,000 Lehawu 40 CoM088 Transport to Gedlembani and Stormwater Public Work Road and Upgrading of Mlambongwane road Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R - R 3,000,000 Mlambongwane 43 CoM089 Transport and Stormwater Public Work Road and Pholani School to Maseko Bus Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 1,000,000 R 5,000,000 R - Daantjie 23 CoM090 Transport Route and Stormwater Public Work Road and Construction of Msholozi Grant - Municipal Infrastructure Grant Roads Infrastructure Development R - R 6,500,000 R - Msholozi 14 CoM091 Transport Pedestrian Bridge and Stormwater Public Work Road and Upgrading of KaPro to Methodist Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 500,000 R 8,000,000 R - Kamaporo 33 CoM092 Transport Church Street and Stormwater Energy Installation of Highmast in various Grant - Municipal Infrastructure Grant Electrification R 4,000,000 R 12,000,000 R 15,000,000 All All CoM125 wards Public Work Road and Construction of Nkululeko circuit Grant - Municipal Infrastructure Grant Roads Infrastructure Development R 500,000 R 10,000,000 R 8,000,000 Matsulu 27 CoM093 Transport road and Stormwater Sub - Total MIG R 331,753,000 R 351,595,000 R 380,141,000

2019/2020 – 2021/2022 Approved Final Budget and Medium Term Revenue and Expenditure Framework Page 58

City Planning and Upgrade of Luphisi Kabokweni and Grant - Neighbourhood Development Roads Infrastructure Development Kabokweni, R 15,000,000 R 28,803,000 R 40,000,000 11,32,33,36,3 Development Plaston Road - Neighbourhood Programme Grant and Stormwater Plaston and 8,40 CoM154 Programme Luphisi Sub - Total NDPG R 15,000,000 R 28,803,000 R 40,000,000 CoM096 Public Work Road and Upgrading of Hensall Street Grant - Public Transport Network Grant Public Transport Mbombela 14 R 1,622,757 R 5,000,000 R - CoM097 TransportPublic Work Road and Upgrading of Bester street Grant - Public Transport Network Grant Public Transport Mbombela 14 R 3,245,514 R 5,000,000 R - CoM098 TransportPublic Work Road and Kaapsehoop Road Widening Grant - Public Transport Network Grant Public Transport West Acress 14 R 4,868,271 R 5,136,038 R - TransportPublic Work Road and Phase Kanyamazane: 2 PT Transfer Grant - Public Transport Network Grant Public Transport Kanyamazane 21 R 10,000,000 R 10,000,000 CoM099 Transport Station Facility R - CoM100 Public Work Road and Matsulu: PT Transfer Station Grant - Public Transport Network Grant Public Transport Matsulu 27 R 11,000,000 R 12,020,127 R - TransportPublic Work Road and Facility Legogote Public Transport Facility Grant - Public Transport Network Grant Public Transport Legogote / R 15,078,524 R 10,000,000 6 CoM101 Transport Swalala R - CoM102 Public Work Road and Kabokweni Public Transport Grant - Public Transport Network Grant Public Transport Kabokweni 33 R 500,000 R 428,003 R - TransportPublic Work Road and Facility Upgrade of Rail Bridge Over Grant - Public Transport Network Grant Public Transport R 10,170,677 R 10,120,127 R - Mbombela CBD 14 CoM103 Transport Freidenhiem Road CoM104 Public Work Road and Bosch Street Interchange Grant - Public Transport Network Grant Public Transport Mbombela CBD 14 R 10,000,000 R 10,000,000 R 10,000,000 CoM105 TransportPublic Work Road and Lehawu Public Transport Facility Grant - Public Transport Network Grant Public Transport Lehawu 40 R 500,000 R 928,003 R - CoM106 TransportPublic Work Road and Hazyview Public Transport Grant - Public Transport Network Grant Public Transport Hazyview 1 R 1,622,757 R 1,712,013 R - CoM107 TransportPublic Work Road and Facilities Secondary PT Stops Southern Grant - Public Transport Network Grant Public Transport Umjindi 41 R 500,000 R 856,006 R - CoM108 TransportPublic Work Road and Region Southern Region PT Rank Grant - Public Transport Network Grant Public Transport Umjindi 41 R 500,000 R 856,006 R - CoM109 TransportPublic Work Road and Mbombela PT Hub: Phase 3 Grant - Public Transport Network Grant Public Transport Mbombela 14 R 2,300,000 R 3,424,025 R - CoM110 TransportPublic Work Road and White River PT Facility Grant - Public Transport Network Grant Public Transport White River 30 R 500,000 R 856,006 R - CoM082 TransportPublic Work Road and PT Social Facilitation Grant - Public Transport Network Grant Public Transport Institutional Institutional R 3,000,000 R 3,000,000 R 12,000,000 CoM082 TransportPublic Work Road and PT Taxi Transition Adviser Grant - Public Transport Network Grant Public Transport Institutional Institutional R 8,764,987 R 4,446,548 R 17,000,000 CoM082 TransportPublic Work Road and PT Bus Transition Adviser Grant - Public Transport Network Grant Public Transport Institutional Institutional R 6,000,000 R 7,000,000 R 17,000,000 CoM082 TransportPublic Work Road and PT Data Collection Specialist Grant - Public Transport Network Grant Public Transport Institutional Institutional R 9,000,000 R 6,000,000 R 19,000,000 CoM082 TransportPublic Work Road and PT Indipendent Facilitator Grant - Public Transport Network Grant Public Transport Institutional Institutional R 6,000,000 R 6,000,000 R 16,586,000 CoM082 TransportPublic Work Road and Marketing & Communication Grant - Public Transport Network Grant Public Transport Institutional Institutional R 6,000,000 R 5,000,000 R 15,000,000 CoM082 TransportPublic Work Road and Universal Access Consultants Grant - Public Transport Network Grant Public Transport Institutional Institutional R 1,500,000 R 1,000,000 R 11,000,000 CoM082 TransportPublic Work Road and PT Program Management Grant - Public Transport Network Grant Public Transport Institutional Institutional R 7,000,000 R 5,000,000 R 13,000,000 CoM082 TransportPublic Work Road and PT Fare Revenue Collection/ Grant - Public Transport Network Grant Public Transport Institutional Institutional R 5,000,000 R 5,000,000 R 25,000,000 TransportPublic Work Road and System Dr Enos Mabuza Widening to Grant - Public Transport Network Grant Public Transport R 10,000,000 R 3,424,025 Mbombela 15 CoM111 Transport Johana Drive R - CoM112 Public Work Road and NMT and Pedestrain Safety Grant - Public Transport Network Grant Public Transport Mbombela 15 &16 R 3,245,514 R 3,424,025 R - TransportPublic Work Road and Projects Upgraiding Road P-10 from R40 Grant - Public Transport Network Grant Public Transport Umjindi 42 R 10,000,000 R 10,000,000 CoM113 Transport to Umjindi CBD R - Public Work Road and Upgrade of bridge structure at Grant - Public Transport Network Grant Public Transport Kanyamazane 21 R 8,000,000 R - CoM114 Transport Kanyamazane Ext 1 Public Work Road and Upgrade of Road 2296 (from Grant - Public Transport Network Grant Public Transport Kanyamazane 21 R 2,000,000 R 10,000,000 R - CoM115 Transport Karino Intercetion to Public Work Road and Expansion of Chris Hani road- Grant - Public Transport Network Grant Public Transport Kamazane 21 R 20,000,000 R 23,500,000 R 40,000,000 CoM116 Transport Kanyamazane CoM117 Public Work Road and Upgrade of R40 through Grant - Public Transport Network Grant Public Transport Hazyview 1 R 10,000,000 R 10,717,045 R 15,000,000 TransportPublic Work Road and Hazyview Upgrade of Tom Lawrence road Grant - Public Transport Network Grant Public Transport White River 30 R 10,000,000 R 10,000,000 R 15,000,000 CoM118 Transport White River Public Work Road and Univerity Public Transport Grant - Public Transport Network Grant Public Transport R 1,000,000 R 20,000,000 R 30,000,000 Riverside 14, 38 CoM119 Transport Precinct (R40 / D725 Interchange) Sub -Total PTNG R 198,919,000 R 209,848,000 R 255,586,000

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Public Work Road and Umjindi Ext 15 - 19 Internal Funding Roads Infrastructure Development Umjindi Ext 15 - 41,45 R 7,000,000 R 12,000,000 R 14,000,000 CoM123 Transport and Stormwater 19 CoM163 Corporate Services Erp System Internal Funding Good Governance Insitutional Institutional R 20,000,000 R 23,000,000 R 26,000,000 Upgrading of Cathyville Internal Funding Community Development Umjindi 42 R 2,250,000 R - R - CoM149 Community Services Swimming pool in baberton Upgrading of bergerville Internal Funding Community Development Umjindi 42 R 2,250,000 R - R - CoM150 Community Services Swimming pool in baberton Water reticulation to the newly Internal Funding Water Supply Daantjie 2 R 5,500,000 R - R - CoM001 Water And Sanitation established Youth Centre Construction of 6 ML New Internal Funding Sanitation/Sewerage Hazyview 1 R 500,000 R 1,000,000 R - CoM002 Water And Sanitation Hazyview WWTW Refurbishment and Upgrade of Internal Funding Sanitation/Sewerage White River 30 R 5,500,000 R - R - CoM003 Water And Sanitation Northern Bulk Outfall Sewer Construction of a new Kabokweni Internal Funding Sanitation/Sewerage Kabokweni 33 R 2,000,000 R - R - sewer pump station, outfall sewer CoM004 Water And Sanitation and associated infrastructure Additional 3.5 ML Reservoir in Internal Funding Water Supply Hazyview 1 R 750,000 R 5,000,000 R - CoM005 Water And Sanitation Hazyview CoM006 Water And Sanitation Procurement of Fleet Internal Funding Water Supply Insitutional Institutional R 3,000,000 R - R - Truck Filling Points (Relocation Internal Funding Water Supply Insitutional Institutional R 2,000,000 R - R - CoM007 Water And Sanitation from Eziweni) CoM008 Water And Sanitation White River Complex Reservoir 3 Internal Funding Water Supply White River 30 R 2,250,000 R - R - ML Upgrade of Phumlani to White Internal Funding Water Supply Phumlani 14 R 6,000,000 R - R - CoM009 Water And Sanitation river bulk water line 132/11kv Montana 2x20mva sub Internal Funding Electricity Supply and Management Mbombela 12,14,15,16,1 R 2,000,000 R 8,000,000 R 12,000,000 CoM124 Energy (cr) 7 132/11kv Anderson 2X20mva Internal Funding Electricity Supply and Management Mbombela 12,14,15,16,1 R 2,000,000 R 7,500,000 R 2,000,000 CoM125 Energy sub upgrade (cr) 7 132/11kv Valencia 20mva sub Internal Funding Electricity Supply and Management Mbombela 18,14,15,16,1 R 2,000,000 R 3,500,000 R 500,000 CoM126 Energy upgrade (cr) 7 Kamagugu11kv switching station Internal Funding Electricity Supply and Management Mbombela 18,14,15,16,1 R 3,500,000 R 3,500,000 R 500,000 CoM127 Energy & mv line (cr) 7 Electrical Protection System and Internal Funding Electricity Supply and Management Mbombela, 18,14,15,16,1 R 1,000,000 R 500,000 R 500,000 Scada (wm) Umjindi, White 7,33,41,42,43 CoM128 Energy River & Hazyview ,45 CoM129 Energy Streetlights Hazyview Phase 2 Internal Funding Electricity Supply and Management Hazyview 1 R 1,000,000 R 700,000 R 700,000 (cr) Installation Streetlights Internal Funding Electricity Supply and Management Kanyamazane 19 R 1,000,000 R - R - CoM130 Energy Kanyamazane (cr) CoM159 Office of Council Purchase of two loudhailing Internal Funding Community Development Insitutional Insitutional R 150,000 R - R - CoM160 Office of Council systems Purchase of Recording System Internal Funding Public Participation Insitutional Insitutional R 130,000 R - R - CoM161 Corporate Services Offisite documents storage Internal Funding Good Governance Insitutional Insitutional R 2,000,000 R 2,000,000 R - CoM162 CorporateRegional Centre Services Co- Facility Replacement of HVAC and Internal Funding Good Governance Insitutional Insitutional R 1,500,000 R - R - CoM164 ordinationRegional Centre Co- aircons installation of Aircons (NR) Internal Funding Good Governance Insitutional Insitutional R 250,000 R - R - CoM165 ordinationRegional Centre Co- Purchase of standby generator Internal Funding Good Governance Insitutional Insitutional R 500,000 R - R - CoM166 ordinationRegional Centre Co- (NR) installation of Aircons (SR) Internal Funding Good Governance Insitutional Insitutional R 250,000 R - R - CoM167 ordinationRegional Centre Co- installation of Aircons (ER) Internal Funding Good Governance Insitutional Insitutional R 150,000 R - R - CoM168 ordinationRegional Centre Co- installation of Aircons (CR) Internal Funding Good Governance Insitutional Insitutional R 250,000 R - R - CoM169 ordination installation of Aircons (HO) Internal Funding Good Governance Insitutional Insitutional R 400,000 R - R - CoM151 Community Services Nkambeni Regional Cemetry Internal Funding Community Development Sandriver 25 R 500,000 R - R - fencing

2019/2020 – 2021/2022 Approved Final Budget and Medium Term Revenue and Expenditure Framework Page 60

Community Services Establishment of Nkambeni Internal Funding Community Development Sandriver 25 R 2,500,000 R 3,000,000 R 3,500,000 CoM152 Regional Cemetry CoM156 Financial Management Asset Management System Internal Funding Financial Viability Institutional Insitutional R 10,000,000 R - R - CoM157 Financial Management Contract Management System Internal Funding Financial Viability Institutional Insitutional R 4,000,000 R - R - Water And Sanitation Refurbishment and Upgrade of Internal Funding Sanitation/Sewerage Hazyview 1 CoM010 Telkom Pump Station and R 2,500,000 R 2,000,000 R - CoM011 Water And Sanitation Refurbishment of Saddleback Internal Funding water supply Barberton 42 R 2,000,000 R - R - CoM012 Water And Sanitation TunnelRaising of Primkom Dam Wall Internal Funding water supply Primkop 18 R 1,500,000 R - R - Com139 Community Services Upgrade of sports Facility in Internal Funding Community Development Nelsville 17 R 400,000 R - R - CoM153 Community Services Nelsville Upgrade of Ablution Facilities Internal Funding Community Development Institutional Insitutional R 1,000,000 R 5,000,000 R 6,000,000 Com144 Pubblic Safety Parks Ablution Facility Internal Funding Public Safety Mbombela R 200,000 R - R - Sub - Total CRR R 101,680,000 R 76,700,000 R 65,700,000

TOTAL CAPITAL BUDGET R682,362,001 R 696,946,000 R771,427,000

1.7 ANNUAL BUDGET TABLES – PARENT MUNICIPALITY

The following pages present the ten main budget tables as required in terms of regulation 8 of the Municipal Budget and Reporting Regulations. These tables set out the City’s 2019/2020 budget and MTREF as approved by the Council. Each table is accompanied by explanatory notes on the facing page.

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Explanatory notes to Table A1 - Budget Summary

1. Table A1 is a budget summary and provides a concise overview of the City’s budget from all of the major financial perspectives (operating, capital expenditure, financial position, cash flow, and MFMA funding compliance).

2. The table provides an overview of the amounts approved by Council for operating performance, resources deployed to capital expenditure, financial position, cash and funding compliance, as well as the City’s commitment to eliminating basic service delivery backlogs.

3. Financial management reforms emphases the importance of the municipal budget being funded. This requires the simultaneous assessment of the Financial Performance, Financial Position and Cash Flow Budgets, along with the Capital Budget. The Budget Summary provides the key information in this regard:

(a) The operating surplus/deficit (after Total Expenditure) is positive over the MTREF (b) Capital expenditure is balanced by capital funding sources, of which;

(i) Transfers recognized are reflected on the Financial Performance Budget; (ii) Borrowing is incorporated in the net cash from financing on the Cash Flow Budget; and (iii) Internally generated funds are financed from a combination of the current operating surplus and accumulated cash-backed surpluses from previous years. The amount is incorporated in the Net cash from investing on the Cash Flow Budget. The fact that the City’s cash flow remains positive, and is improving indicates that the necessary cash resources are available to fund the Capital Budget.

4. The Cash backing/surplus reconciliation shows positive cash balance which means that the municipalities’ obligation will be met for the rest of the MTREF after considering its application of cash and investments.

5. The section of Free Services shows that the amount spent on Free Basic Services by the City continues to increase whiles the revenue cost continues to decrease for the MTREF.

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MP326 City of Mbombela - Table A2 Budgeted Financial Performance (revenue and expenditure by functional classification) 2019/20 Medium Term Revenue & Functional Classification Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Budget Year Budget Year Budget Year R thousand 1 Outcome Outcome Outcome Budget Budget Forecast 2019/20 +1 2020/21 +2 2021/22 Revenue - Functional Governance and administration – – 1,163,393 1,326,574 1,336,629 1,336,629 1,433,068 1,543,106 1,664,313 Ex ecutiv e and council – – 403 865 865 865 951 1,046 1,151 Finance and administration – – 1,162,990 1,325,710 1,335,765 1,335,765 1,432,117 1,542,059 1,663,162 Internal audit – – – 0 0 0 0 0 0 Community and public safety – – 8,342 13,073 8,077 8,077 9,984 10,983 12,081 Community and social serv ices – – 1,589 825 825 825 907 998 1,098 Sport and recreation – – 4,036 4,398 398 398 1,538 1,692 1,861 Public safety – – 2,717 7,850 6,854 6,854 7,539 8,293 9,122 Housing – – – – – – – – – Health – – – – – – – – – Economic and environmental services – – 588,310 776,032 848,450 848,450 579,816 621,185 679,559 Planning and dev elopment – – 543,064 576,963 659,385 659,385 578,801 620,069 678,332 Road transport – – 45,246 199,069 189,065 189,065 1,014 1,116 1,227 Env ironmental protection – – – 0 0 0 0 0 0 Trading services – – 1,164,935 1,221,804 1,246,804 1,246,804 1,424,381 1,526,953 1,637,371 Energy sources – – 912,852 975,889 995,889 995,889 1,154,044 1,235,098 1,321,980 Water management – – 124,022 101,759 103,759 103,759 115,954 125,235 135,388 Waste w ater management – – 27,229 28,675 26,675 26,675 23,826 25,715 27,780 Waste management – – 100,831 115,481 120,481 120,481 130,556 140,905 152,222 Other 4 – – – – – – – – – Total Revenue - Functional 2 – – 2,924,980 3,337,483 3,439,960 3,439,960 3,447,249 3,702,226 3,993,324 Expenditure - Functional Governance and administration – – 793,577 679,656 653,876 653,876 705,478 714,093 728,929 Ex ecutiv e and council – – 191,877 157,130 148,791 148,791 154,914 156,235 160,943 Finance and administration – – 597,288 517,013 494,761 494,761 541,158 546,752 555,649 Internal audit – – 4,411 5,514 10,324 10,324 9,407 11,106 12,337 Community and public safety – – 304,352 387,252 443,007 443,007 423,028 436,133 452,816 Community and social serv ices – – 44,426 64,104 70,301 70,301 69,354 71,409 74,139 Sport and recreation – – 161,464 191,163 232,572 232,572 197,145 201,906 209,434 Public safety – – 75,118 120,031 126,149 126,149 143,384 149,229 155,057 Housing – – 23,344 11,954 13,985 13,985 13,144 13,590 14,186 Health – – – – – – – – – Economic and environmental services – – 514,101 551,856 572,188 572,188 452,958 470,675 482,763 Planning and dev elopment – – 315,590 164,740 179,326 179,326 169,078 176,953 183,531 Road transport – – 185,239 379,346 372,267 372,267 275,147 285,677 291,509 Env ironmental protection – – 13,272 7,770 20,595 20,595 8,734 8,045 7,723 Trading services – – 1,484,184 1,559,724 1,493,067 1,493,067 1,634,905 1,722,959 1,824,294 Energy sources – – 793,890 877,481 817,389 817,389 946,116 1,008,481 1,078,387 Water management – – 239,535 315,548 298,566 298,566 304,170 305,804 311,997 Waste w ater management – – 141,171 135,490 126,905 126,905 143,042 152,213 158,678 Waste management – – 309,587 231,205 250,208 250,208 241,577 256,460 275,231 Other 4 – – 13,257 31,791 31,651 31,651 33,557 35,327 37,235 Total Expenditure - Functional 3 – – 3,109,470 3,210,279 3,193,790 3,193,790 3,249,926 3,379,187 3,526,037 Surplus/(Deficit) for the year – – (184,490) 127,204 246,170 246,170 197,322 323,039 467,287

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Explanatory notes to Table A2 - Budgeted Financial Performance (revenue and expenditure by standard classification)

1. Table A2 is a view of the budgeted financial performance in relation to revenue and expenditure per standard classification. The modified GFS standard classification divides the municipal services into 15 functional areas. Municipal revenue, operating expenditure and capital expenditure are then classified in terms if each of these functional areas which enables the National Treasury to compile ‘whole of government’ reports.

2. Note the Total Revenue on this table includes capital revenues (Transfers recognized – capital) and it does balance to the operating revenue shown on Table A4.

3. Note that as a general principle the revenues for the Trading Services should exceed their expenditures. The table highlights that this is not the case on Water, Waste water functions and the Waste management function. As already noted above, the City will be undertaking a detailed study of this function to explore ways of improving efficiencies and provide a basis for re-evaluating the function’s tariff structure.

Explanatory notes Table A3 - Budgeted Financial Performance (revenue and expenditure by municipal vote) MP326 City of Mbombela - Table A3 Budgeted Financial Performance (revenue and expenditure by municipal vote) 2019/20 Medium Term Revenue & Vote Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Budget Year Budget Year Budget Year R thousand Outcome Outcome Outcome Budget Budget Forecast 2019/20 +1 2020/21 +2 2021/22 Revenue by Vote 1 Vote 01 - Council – – (6) 5 5 5 6 7 7 Vote 02 - Office Of Council – – – 594 594 594 653 718 790 Vote 03 - Municipal Manager – – 6,349 4,223 3,223 3,223 9,248 10,074 10,986 Vote 04 - City Planning And Dev elopment Department – – 13,005 7,591 22,591 22,591 28,151 30,966 34,062 Vote 05 - Corporate Serv ices Department – – 1,857 598 598 598 658 724 797 Vote 06 - Strategic Management Serv ices – – – – – – – – – Vote 07 - Financial Management – – 1,158,232 1,320,503 1,330,558 1,330,558 1,428,589 1,538,179 1,658,893 Vote 08 - Legal Serv ices – – – – – – – – – Vote 09 - Regional Centre Coordination – – – – – – – – – Vote 10 - Community Serv ices – – 106,456 120,704 121,704 121,704 133,002 143,595 155,181 Vote 11 - Public Works, Roads And Transport – – 536,208 573,969 641,391 641,391 553,508 592,246 647,727 Vote 12 - Public Safety – – 44,715 206,930 195,930 195,930 8,565 9,422 10,364 Vote 13 - Water And Sanitation – – 145,311 126,477 127,477 127,477 130,824 141,198 152,536 Vote 14 - Energy – – 912,852 975,889 995,889 995,889 1,154,044 1,235,098 1,321,980 Vote 15 - Other – – – – – – – – – Total Revenue by Vote 2 – – 2,924,980 3,337,483 3,439,960 3,439,960 3,447,249 3,702,226 3,993,324 Expenditure by Vote to be appropriated 1 Vote 01 - Council – – 119,545 69,965 68,242 68,242 70,876 72,528 74,904 Vote 02 - Office Of Council – – 22,092 28,414 26,808 26,808 28,706 28,995 29,624 Vote 03 - Municipal Manager – – 93,259 113,767 123,918 123,918 113,003 113,249 116,181 Vote 04 - City Planning And Dev elopment Department – – 308,603 119,169 117,257 117,257 118,333 120,687 124,779 Vote 05 - Corporate Serv ices Department – – 197,741 122,971 124,471 124,471 163,338 163,030 165,122 Vote 06 - Strategic Management Serv ices – – 32,357 40,130 43,330 43,330 41,498 42,786 44,454 Vote 07 - Financial Management – – 263,221 255,737 217,125 217,125 244,260 249,380 255,325 Vote 08 - Legal Serv ices – – 5,444 2,071 6,277 6,277 2,623 2,346 2,204 Vote 09 - Regional Centre Coordination – – 20,019 21,558 37,109 37,109 22,445 21,821 21,834 Vote 10 - Community Serv ices – – 465,098 453,423 522,547 522,547 472,771 493,339 520,538 Vote 11 - Public Works, Roads And Transport – – 239,038 430,509 446,942 446,942 408,461 433,498 446,085 Vote 12 - Public Safety – – 181,813 331,961 320,699 320,699 275,944 285,740 295,394 Vote 13 - Water And Sanitation – – 367,349 346,146 324,697 324,697 344,726 346,638 354,705 Vote 14 - Energy – – 793,890 874,459 814,367 814,367 942,942 1,005,149 1,074,889 Vote 15 - Other – – – – – – – – – Total Expenditure by Vote 2 – – 3,109,470 3,210,279 3,193,790 3,193,790 3,249,926 3,379,187 3,526,037 Surplus/(Deficit) for the year 2 – – (184,490) 127,204 246,170 246,170 197,322 323,039 467,287

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Table A3 is a view of the budgeted financial performance in relation to the revenue and expenditure per municipal vote. This table facilitates the view of the budgeted operating performance in relation to the organisational structure of the City. This means it is possible to present the operating surplus or deficit of a vote.

Explanatory notes to Table A4 - Budgeted Financial Performance (revenue and expenditure)

MP326 City of Mbombela - Table A4 Budgeted Financial Performance (revenue and expenditure) 2019/20 Medium Term Revenue & Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Pre-audit Budget Year Budget Year Budget Year R thousand 1 Outcome Outcome Outcome Budget Budget Forecast outcome 2019/20 +1 2020/21 +2 2021/22 Revenue By Source Property rates 2 – – 466,134 602,531 606,531 606,531 578,747 642,360 677,047 713,608 Serv ice charges - electricity rev enue 2 – – 872,307 944,852 964,852 964,852 910,907 1,119,104 1,205,173 1,292,059 Serv ice charges - w ater rev enue 2 – – 88,654 97,758 100,758 100,758 95,442 111,491 120,328 129,993 Serv ice charges - sanitation rev enue 2 – – 27,222 28,675 26,675 26,675 20,384 23,826 25,714 27,780 Serv ice charges - refuse rev enue 2 – – 100,727 107,241 112,241 112,241 111,046 130,556 140,905 152,222 Rental of facilities and equipment – – 9,878 12,694 7,694 7,694 3,608 8,464 9,310 10,241 Interest earned - ex ternal inv estments – – 8,581 1,740 5,740 5,740 7,016 6,329 6,977 7,693 Interest earned - outstanding debtors – – 42,909 28,859 24,859 24,859 23,651 27,345 30,079 33,087 Div idends receiv ed Fines, penalties and forfeits – – 6,629 8,363 7,363 7,363 5,648 8,099 8,909 9,800 Licences and permits – – 3,197 – – – 183,144 – – – Agency serv ices – – 38,796 198,143 188,143 188,143 – – – – Transfers and subsidies – – 776,204 741,061 742,116 742,116 745,857 733,561 796,761 874,460 Other rev enue 2 – – 36,720 28,575 48,575 48,575 48,633 53,432 58,776 64,653 Gains on disposal of PPE – – – – – – – – – – Total Revenue (excluding capital transfers – – 2,477,958 2,800,491 2,835,546 2,835,546 2,734,082 2,864,567 3,079,980 3,315,597 and contributions) Expenditure By Type Employ ee related costs 2 – – 793,706 887,762 890,762 890,762 890,762 1,010,483 1,075,118 1,146,614 Remuneration of councillors – – 38,422 41,696 41,696 41,696 41,696 43,865 46,277 48,822 Debt impairment 3 – – 160,305 143,664 133,010 133,010 133,010 106,974 112,975 119,321 Depreciation & asset impairment 2 – – 502,874 540,557 540,557 540,557 540,557 545,585 595,964 625,762 Finance charges – – 66,272 40,039 43,419 43,419 43,419 45,677 48,144 50,743 Bulk purchases 2 – – 706,812 736,187 729,119 729,119 729,119 839,462 906,289 978,386 Other materials 8 – – 46,715 55,567 45,300 45,300 45,300 54,212 49,875 45,885 Contracted serv ices – – 518,854 473,762 495,510 495,510 495,510 406,824 362,928 341,435 Transfers and subsidies – – 31,912 35,310 28,750 28,750 24,643 32,670 34,580 36,734 Other ex penditure 4, 5 – – 240,049 255,735 245,667 245,667 245,667 164,175 147,038 132,334 Loss on disposal of PPE – – 3,548 – – – – – – – Total Expenditure – – 3,109,470 3,210,279 3,193,790 3,193,790 3,189,683 3,249,926 3,379,187 3,526,037 Surplus/(Deficit) – – (631,512) (409,788) (358,244) (358,244) (455,601) (385,360) (299,207) (210,440) Transfers and subsidies - capital (monetary allocations) (National / Prov incial and District) – – 443,780 536,992 604,414 604,414 410,415 582,682 622,246 677,727 Transfers and subsidies - capital (monetary allocations) (National / Prov incial Departmental Agencies, Households, Non-profit Institutions, Priv ate Enterprises, Public Corporatons, Higher 6 – – 3,242 – – – – – – – Transfers and subsidies - capital (in-kind - all) – – – – – – 10,994 – – – Surplus/(Deficit) after capital transfers & – – (184,490) 127,204 246,170 246,170 (34,192) 197,322 323,039 467,287 contributions

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In conclusion, the graphic illustration the main revenue streams of the City is as follows;

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The recommendations by National Treasury and the agreed principle and methodology has been considered and factored into the final 2019/2020- 2021/2022 Budget and Medium Term Revenue and Expenditure Framework (MTREF) where possible, furthermore the following amendments have been made on the adopted draft operating budget in preparation for the proposed final budget after internal and external consultative process was undertaken;

(a) The 2019/2020 Draft Operating Budget was tabled with a surplus of R70 million after taking into account the revenue recognised from conditional capital grants amounting to R575 million. The assessment and analysis of the draft budget was thereafter conducted to consider all realistically anticipated revenue and expenditure emanating from the budget cuts from the engagement with National Treasury and the implementation of the revenue enhancement strategy. The surplus was thereafter increased by R127 million to R197 million for the 2019/2020 financial year.

(b) The increase in the overall surplus is as a result of the reduction in the operating expenditure budget by R135 million or 3.9 percent from the total draft operating expenditure budget amounting to R3 384 billion to the final budged amount of R3 249 billion.The cost drivers for the decrease in the final operating expenditure budget for 2019/2020 financial year are as follows;

(c) Debt impairment will decrease by R104 million or 49 percent to R107 million in 2019/2020 from the draft budget amount of R211 million this represents 3 percent of the total operating expenditure. The draft budget was prepared at 90 percent due to the Cash flow challenges then National Treasury proposed that the collection rate be increased to 95 percent this is mainly due to the potential of the City having to collect 95 percent on the current account of its projected revenues with a 5 percent provision for doubtful debts the municipality must also implement the measures contained in the revenue enhancement strategy to improve collection of outstanding debts or payment rate in 2019/2020 financial year and beyond. The measures include exploring the possibility of implementing the debtors factoring, monitoring and reviewing the performance of the debt collectors and the implementation of payment incentives for good customers.

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(d) The remuneration cost, excluding councilor’s allowances will amount to R1 010 billion in 2019/2020 financial year showing and increase of 13 percent compared to an amount of R891 million in 2018/2019 included in the 2019/2020 allocation an amount R33 million is allocated as a provision to fund critical positions as part of the cost curtailment strategy to reduce contracted services. The remuneration cost constitutes 31 percent of the total operating expenditure for 2019/2020.The remuneration cost will increase to R1 075 billion in 2020/2021 and to R1 147 billion in 2021/2022 financial year.

(e) Councilor’s remuneration will amount to R44 million in 2019/2020 financial year indicating a 5 percent increase compared to R43 million in 2018/2019 it will further increase to R46 million and R49 million respectively in 2020/2021 and 2021/2022. This constitutes 1 percent to the total operating expenditure budget.

(f) The bulk purchase expenditure is mainly expenditure for bulk electricity purchase from Eskom and the bulk water purchase and will increase to R839 million in 2019/2020 due to an average increase of 15.63 percent granted to Eskom by the National Energy Regulator of South Africa, the increase will come into effect from 01 July 2019 and bulk water increase of 7.4 percent. The bulk purchase expenditure makes up 25 percent of the total operating expenditure budget.

(g) The depreciation cost will be R546 million showing and increase of 1 percent the depreciation cost makes up 17 percent of the total operating expenditure and is about 7 percent of the total assets carrying value of R7 966 billion. The depreciation costs represent the rate at which the assets of the municipality are utilized in rendering services and therefore the cost should be provided for/included on the budget to ensure the current ratepayers and users of the municipal services are able to contribute towards the refurbishment, upgrade and renewal of the assets.

(h) Contracted services will decrease by 17 percent or R86 million from R495 million in 2018/2019 to R409 million in 2019/2020 in response to the call by National Treasury to reduce the cost of running the city using external service providers in non - specialised services than utilising our own labour force this accounts for 13 percent of the total operating expenditure budget.

(i) Other Expenditure will decrease by 33 percent or 82 million from R246 million to 164 million in 2019/2020 financial year which makes up 5 percent of the total operating budget it will further decrease to R132 million over the medium term the huge decrease is due to implementation of the cost curtailment measures applied in line with National Treasury directives.

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In conclusion, the graphic illustration the main expenditure by type streams of the City is as follows;

Explanatory notes to Table A5 - Budgeted Capital Expenditure by vote, standard classification and funding source

1. Table A5 is a breakdown of the capital program in relation to capital expenditure by municipal vote (multi-year and single-year appropriations); capital expenditure by standard classification; and the funding sources necessary to fund the capital budget, including information on capital transfers from national and provincial departments.

2. The MFMA provides that a City may approve multi-year or single-year capital budget appropriations. R682 million has been allocated for 2019/2020 shows a decrease of 9 percent or R64 million from the 2018/2019 budget of R746 million and will then increase to R697 in 2020/2021 and R771 million in 2021/2022.

3. Unlike multi-year capital appropriations, single-year appropriations relate to expenditure that will be incurred in the specific budget year such as the procurement of vehicles and specialized tools and equipment. The budget appropriations for the two outer years are indicative allocations based on the departmental business plans as informed by the IDP and will be reviewed on an annual basis to assess the relevance of the expenditure in relation to the strategic objectives and service delivery imperatives of the City. For the purpose of funding assessment of the MTREF, these appropriations have been included but no commitments will be incurred against single-year appropriations for the two outer- years.

4. The capital program is funded from national and provincial grants and transfers, public contributions and donations, borrowing and internally generated funds the availability of internal reserves will depend largely on collection of outstanding debts. For 2019/2020, capital grants totals R581 million, to R620 million by 2020/2021 and a further increase to

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R706 million by 2021/2022. No borrowing anticipated due to the dwindling economy in 2019/2020 with internally generated funding totaling R102 million, R77 million and R66 million for each of the respective financial years of the MTREF.

5. The allocation of the capital funding on projects was based on the municipal priorities informed by the public participation and consultative process conducted during the review of the Integrated Development Plan (IDP).

6. The City will be spending in the next three years R1 844 billion (86 percent) of the total capital expenditure budget) on social infrastructure development to address backlogs.

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2019/20 Medium Term Revenue & Vote Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Pre-audit Budget Year Budget Year Budget Year R thousand 1 Outcome Outcome Outcome Budget Budget Forecast outcome 2019/20 +1 2020/21 +2 2021/22 Capital expenditure - Vote Multi-year expenditure to be appropriated 2 Vote 01 - Council – – – – – – – – – – Vote 02 - Office Of Council – – – – – – – – – – Vote 03 - Municipal Manager – – – – – – – – – – Vote 04 - City Planning And Dev elopment Department – – – 2,750 15,000 15,000 13,899 – – – Vote 05 - Corporate Serv ices Department – – – – 3,000 3,000 – – – – Vote 06 - Strategic Management Serv ices – – – – – – – – – – Vote 07 - Financial Management – – – – – – – – – – Vote 08 - Legal Serv ices – – – – – – – – – – Vote 09 - Regional Centre Coordination – – – – – – – – – – Vote 10 - Community Serv ices – – – – – – – 2,500 3,000 3,500 Vote 11 - Public Works, Roads And Transport – – – 167,781 155,413 155,413 22,815 286,323 365,127 430,086 Vote 12 - Public Safety – – – – – – – – – – Vote 13 - Water And Sanitation – – – 36,219 17,356 17,356 11,006 47,674 38,000 10,000 Vote 14 - Energy – – – 16,545 23,661 23,661 18,360 13,340 19,490 23,490 Vote 15 - Other – – – – – – – – – – Capital multi-year expenditure sub-total 7 – – – 223,295 214,430 214,430 66,079 349,837 425,617 467,076 Single-year expenditure to be appropriated 2 Vote 01 - Council – – – – – – – – – – Vote 02 - Office Of Council – – – – – – – 280 – – Vote 03 - Municipal Manager – – – – – – – – – – Vote 04 - City Planning And Dev elopment Department – – – 44,140 36,240 36,240 34,281 18,000 33,803 40,000 Vote 05 - Corporate Serv ices Department – – – – 7,405 7,405 2,105 23,900 25,000 26,000 Vote 06 - Strategic Management Serv ices – – – – – – – – – – Vote 07 - Financial Management – – – – 17,428 17,428 17,069 14,000 – – Vote 08 - Legal Serv ices – – – – – – – – – – Vote 09 - Regional Centre Coordination – – – – 500 500 404 1,400 – – Vote 10 - Community Serv ices – – – 900 3,496 3,496 1,399 6,400 5,000 6,000 Vote 11 - Public Works, Roads And Transport – – – 219,541 338,451 338,451 245,633 169,175 121,316 114,641 Vote 12 - Public Safety – – – 350 4,500 4,500 – 200 – – Vote 13 - Water And Sanitation – – – 125,866 103,890 103,890 98,797 61,000 40,000 80,000 Vote 14 - Energy – – – 16,500 16,934 16,934 5,908 38,170 46,210 37,710 Vote 15 - Other – – – – – – – – – – Capital single-year expenditure sub-total – – – 407,297 528,844 528,844 405,597 332,525 271,329 304,351 Total Capital Expenditure - Vote – – – 630,592 743,275 743,275 471,676 682,362 696,946 771,427 Capital Expenditure - Functional Governance and administration – – – – 29,333 29,333 19,579 39,580 25,000 26,000 Ex ecutiv e and council – – – – – – – 280 – – Finance and administration – – – – 29,333 29,333 19,579 39,300 25,000 26,000 Internal audit – Community and public safety – – – 39,410 28,309 28,309 16,277 56,100 24,892 58,500 Community and social serv ices – – – 23,850 19,957 19,957 10,360 38,200 18,000 58,500 Sport and recreation – – – 15,560 8,352 8,352 5,917 17,900 6,892 – Public safety – – – – – – – – – – Housing – – – – – – – – – – Health Economic and environmental services – – – 330,578 461,030 461,030 246,308 386,069 448,354 474,727 Planning and dev elopment – – – 70,098 91,836 91,836 57,135 90,518 152,092 66,000 Road transport – – – 260,480 369,194 369,194 189,173 295,551 296,262 408,727 Env ironmental protection Trading services – – – 252,999 222,647 222,647 188,766 200,613 198,700 212,200 Energy sources – – – 33,045 40,595 40,595 24,267 51,510 65,700 61,200 Water management – – – 150,075 102,662 102,662 106,732 112,174 95,000 100,000 Waste w ater management – – – 69,879 78,283 78,283 57,011 32,229 23,000 20,000 Waste management – – – – 1,107 1,107 757 4,700 15,000 31,000 Other – – – 7,605 1,955 1,955 746 – – – Total Capital Expenditure - Functional 3 – – – 630,592 743,275 743,275 471,676 682,362 696,946 771,427 Funded by: National Gov ernment – – – 536,992 604,414 604,414 382,855 572,682 620,246 705,727 Prov incial Gov ernment District Municipality Other transfers and grants – – – – – – – 8,000 – – Transfers recognised - capital 4 – – – 536,992 604,414 604,414 382,855 580,682 620,246 705,727 Borrowing 6 Internally generated funds – – – 93,600 138,861 138,861 88,821 101,680 76,700 65,700 Total Capital Funding 7 – – – 630,592 743,275 743,275 471,676 682,362 696,946 771,427

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Explanatory notes to Table A6 - Budgeted Financial Position

MP326 City of Mbombela - Table A6 Budgeted Financial Position 2019/20 Medium Term Revenue & Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Pre-audit Budget Year Budget Year Budget Year R thousand Outcome Outcome Outcome Budget Budget Forecast outcome 2019/20 +1 2020/21 +2 2021/22 ASSETS Current assets Cash – – 83,671 120,127 95,200 95,200 42,692 86,698 140,433 165,107 Call inv estment deposits 1 – – 9,216 – – – 25,496 – – – Consumer debtors 1 – – 258,610 287,441 287,441 287,441 321,048 421,465 534,439 540,405 Other debtors – – 78,284 94,315 94,315 94,315 249,362 174,883 160,893 149,630 Current portion of long-term receiv ables – – 495 5,021 5,021 5,021 (126) 4,519 4,293 4,078 Inv entory 2 – – 19,101 119,071 119,071 119,071 21,862 19,453 20,036 20,437 Total current assets – – 449,378 625,976 601,049 601,049 660,333 707,018 860,095 879,658 Non current assets Long-term receiv ables – – 3,793 4,150 4,150 4,150 3,480 – – – Inv estments – – 18,398 58,433 58,433 58,433 0 – – – Inv estment property – – 332,431 – – – 332,431 332,431 332,431 332,431 Inv estment in Associate Property , plant and equipment 3 – – 7,195,800 7,965,683 8,197,284 8,197,284 7,667,548 7,495,271 8,108,352 8,811,332 Biological Intangible – – 15,097 12,831 14,132 14,132 15,717 50,126 71,126 97,126 Other non-current assets – – 2,302 – – – 2,302 2,302 2,302 2,302 Total non current assets – – 7,567,820 8,041,097 8,273,998 8,273,998 8,021,478 7,880,130 8,514,211 9,243,191 TOTAL ASSETS – – 8,017,198 8,667,072 8,875,047 8,875,047 8,681,810 8,587,147 9,374,305 10,122,849 LIABILITIES Current liabilities Bank ov erdraft 1 – – – – – – – – – – Borrow ing 4 – – 62,976 29,302 29,302 29,302 62,976 29,971 32,369 35,606 Consumer deposits – – 36,920 36,427 36,427 36,427 39,930 38,249 39,013 39,794 Trade and other pay ables 4 – – 1,601,401 647,952 647,952 647,952 1,546,056 892,975 826,380 881,999 Prov isions – – 31,945 29,246 29,246 29,246 31,945 28,661 28,947 29,816 Total current liabilities – – 1,733,242 742,927 742,927 742,927 1,680,907 989,855 926,709 987,214 Non current liabilities Borrow ing – – 243,420 237,701 237,701 237,701 157,938 207,730 175,361 139,755 Prov isions – – 352,483 314,791 314,791 314,791 283,518 321,087 327,508 330,784 Total non current liabilities – – 595,904 552,492 552,492 552,492 441,456 528,817 502,870 470,539 TOTAL LIABILITIES – – 2,329,146 1,295,419 1,295,419 1,295,419 2,122,363 1,518,672 1,429,579 1,457,753 NET ASSETS 5 – – 5,688,052 7,371,653 7,579,627 7,579,627 6,559,448 7,068,475 7,944,726 8,665,097

1. Table A6 is consistent with international standards of good financial management practice, and improves understandability for councilors and management of the impact of the budget on the statement of financial position (balance sheet).

2. This format of presenting the statement of financial position is aligned to GRAP1, which is generally aligned to the international version which presents Assets less Liabilities as “accounting” Community Wealth. The order of items within each group illustrates items in order of liquidity; i.e. assets readily converted to cash, or liabilities immediately required to be met from cash, appear first.

3. Table SA3 is supported by an extensive table of notes providing a detailed analysis of the major components of a number of items, including:

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 Call investments deposits;  Consumer debtors;  Property, plant and equipment;  Trade and other payables;  Provisions non-current;  Changes in net assets; and  Reserves

4. The municipal equivalent of equity is Community Wealth/Equity. The justification is that ownership and the net assets of the City belong to the community. MP326 City of Mbombela - Table A7 Budgeted Cash Flows 2019/20 Medium Term Revenue & Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Pre-audit Budget Year Budget Year Budget Year R thousand Outcome Outcome Outcome Budget Budget Forecast outcome 2019/20 +1 2020/21 +2 2021/22 CASH FLOW FROM OPERATING ACTIVITIES Receipts Property rates 374,822 436,605 554,329 554,329 554,329 554,329 610,242 643,195 677,928 Serv ice charges 834,900 790,853 1,084,243 1,111,843 1,111,843 1,111,843 1,315,728 1,417,514 1,521,952 Other rev enue 56,154 275,345 245,530 235,530 235,530 235,530 66,496 73,145 80,460 Gov ernment - operating 1 489,553 674,660 741,061 692,306 692,306 692,306 733,561 796,761 874,460 Gov ernment - capital 1 638,017 528,560 521,937 536,992 536,992 536,992 582,682 622,246 677,727 Interest 28,240 51,491 28,151 18,151 18,151 18,151 32,306 35,553 39,125 Div idends – – – – – – – – – Payments Suppliers and employ ees (1,723,849) (2,098,482) (2,517,972) (2,397,266) (2,397,266) (2,397,266) (2,630,453) (2,760,682) (2,994,176) Finance charges (46,290) (63,148) (37,165) (37,165) (37,165) (37,165) (44,764) (47,181) (49,729) Transfers and Grants 1 (39,271) (37,031) (35,270) (35,270) (35,270) (35,270) (30,203) (32,348) (34,612) NET CASH FROM/(USED) OPERATING ACTIVITIES – 612,276 558,854 584,844 679,451 679,451 679,451 635,595 748,203 793,135 CASH FLOWS FROM INVESTING ACTIVITIES Receipts Proceeds on disposal of PPE 1,225 958 – – – – – – Decrease (Increase) in non-current debtors 15,000 – – – – – Decrease (increase) other non-current receiv ables 159 (601) – – – – – – Decrease (increase) in non-current inv estments (994) (1,137) – – – – – – Payments Capital assets (610,934) (480,973) (599,891) (619,891) (619,891) (619,891) (614,126) (662,099) (732,856) NET CASH FROM/(USED) INVESTING ACTIVITIES – (610,544) (481,753) (584,891) (619,891) (619,891) (619,891) (614,126) (662,099) (732,856) CASH FLOWS FROM FINANCING ACTIVITIES Receipts Short term loans – – – – – – – Borrow ing long term/refinancing 754 410 – – – – – – Increase (decrease) in consumer deposits (266) (3,130) – – – – – – Payments Repay ment of borrow ing (4,711) (5,359) (27,247) (57,247) (57,247) (57,247) (29,971) (32,369) (35,606) NET CASH FROM/(USED) FINANCING ACTIVITIES – (4,223) (8,079) (27,247) (57,247) (57,247) (57,247) (29,971) (32,369) (35,606) NET INCREASE/ (DECREASE) IN CASH HELD – (2,491) 69,022 (27,293) 2,314 2,314 2,314 (8,502) 53,736 24,674 Cash/cash equiv alents at the y ear begin: 2 26,356 23,864 147,420 92,886 92,886 92,886 95,200 86,698 140,433 Cash/cash equiv alents at the y ear end: 2 – 23,864 92,887 120,127 95,200 95,200 95,200 86,698 140,433 165,107

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Explanatory notes to Table A7 - Budgeted Cash Flow Statement 1. The budgeted cash flow statement is the first measurement in determining if the budget is funded. 2. It shows the expected level of cash in-flow versus cash out-flow that is likely to result from the implementation of the budget. 3. The 2019/2020 MTREF has been informed by the planning principle of ensuring adequate cash reserves over the medium-term. 4. The above table reflects that the City will decrease its cash flow position by 35 percent from R147 million as at June 2018 to R95 million in June 2019 and projected to decrease to R87 million in 2019/2020. 5. The cash inflows will be generated from operating activities amounting to R3 341 billion and R130 million from investing activities including (VAT refund) and no allocation from financing activities due to the economic downturn. 6. The cash generated from operating activities will be utilised to fund R2 705 billion worth of suppliers and employees, fund or invest on (capital expenditure) amounting to R614 million and financing activities (repayment of borrowings) amounting to R30 million.

2019/20 Medium Term Revenue & Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Budget Year Budget Year Budget Year R thousand Outcome Outcome Outcome Budget Budget Forecast 2019/20 +1 2020/21 +2 2021/22 Cash and investments available Cash/cash equiv alents at the y ear end 1 – 23,864 92,887 120,127 95,200 95,200 86,698 140,433 165,107 Other current inv estments > 90 day s – – – (0) (0) (0) – – – Non current assets - Inv estments 1 – 17,260 18,398 58,433 58,433 58,433 – – – Cash and investments available: – 41,124 111,284 178,559 153,632 153,632 86,698 140,433 165,107 Application of cash and investments Unspent conditional transfers – 169,521 153,209 – – – – – – Unspent borrow ing – – – – – – – – – Statutory requirements 2 – (86,364) (86,828) (126,054) (126,054) (126,054) (130,299) (121,602) (120,734) Other w orking capital requirements 3 – 970,012 1,154,399 294,601 266,425 266,425 173,736 174,544 235,378 Other prov isions – – – – – – – – – Long term inv estments committed 4 – – – – – – – – – Reserv es to be backed by cash/inv estments 5 – – – – – – – – – Total Application of cash and investments: – 1,053,169 1,220,780 168,548 140,372 140,372 43,436 52,941 114,644 Surplus(shortfall) – (1,012,044) (1,109,496) 10,012 13,261 13,261 43,261 87,492 50,463 Explanatory notes to Table A8 - Cash Backed Reserves/Accumulated Surplus Reconciliation

1. The cash backed reserves/accumulated surplus reconciliation is aligned to the requirements of MFMA Circular 42 – Funding a Municipal Budget. 2. In essence the table evaluates the funding levels of the budget by firstly forecasting the cash and investments at year end and secondly reconciling the available funding to the liabilities/commitments that exist. 3. The outcome of this exercise would either be a surplus or deficit. A deficit would indicate that the applications exceed the cash and investments available and would be indicative of non-compliance with the MFMA requirements that the City’s budget must be “funded”. 4. Non-compliance with section 18 of the MFMA is assumed because a shortfall would indirectly indicate that the annual budget is not appropriately funded. 5. As part of the budgeting and planning guidelines that informed the compilation of the 2019/2020 MTREF the end objective of the medium-term framework was to ensure the budget is funded aligned to section 18 of the MFMA.

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6. As can be seen that the budget has been modeled to progressively move from a small surplus of R43 million in 2019/2020 to R87 million in 2020/2021 after meeting the obligations.

Explanatory notes to Table A9 - Asset Management

1. Table A9 provides an overview of municipal capital allocations to building new assets and the renewal of existing assets, as well as spending on repairs and maintenance by asset class.

2. For the 2019/2020 financial year 69 percent or (R211 million) of total repairs and maintenance by asset class will be spent on infrastructure assets. Roads infrastructure has received a significant proportion of this allocation totaling 28 percent (R84 million), followed by Water supply 13 percent (R41 million), Electrical by 7 percent (R21 million), Community assets 15 percent (R47 million), Other assets is at 8 percent (R24 million), Sanitation and solid waste both taking an 8 percent each and Transport asset 3 percent (R11 million).

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MP326 City of Mbombela - Table A9 Asset Management 2019/20 Medium Term Revenue & Description Ref 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Audited Audited Audited Original Adjusted Full Year Budget Year Budget Year Budget Year R thousand Outcome Outcome Outcome Budget Budget Forecast 2019/20 +1 2020/21 +2 2021/22 CAPITAL EXPENDITURE Total New Assets 1 – – 70,824 434,193 490,460 490,460 458,805 479,778 496,927 Roads Infrastructure – – 34,692 196,494 234,305 234,305 235,083 269,222 282,727 Storm water Infrastructure – – 1,051 17,083 31,269 31,269 – – – Electrical Infrastructure – – 19,551 37,948 40,348 40,348 38,510 54,200 58,200 Water Supply Infrastructure – – 2,499 90,009 63,066 63,066 57,674 55,000 20,000 Sanitation Infrastructure – – 2,806 34,046 26,246 26,246 22,229 21,000 20,000 Solid Waste Infrastructure – – – – 7,337 7,337 3,500 10,000 25,000 Rail Infrastructure – – – – – – – – – Coastal Infrastructure – – – – – – – – – Information and Communication Infrastructure – – – – 500 500 1,000 500 500 Infrastructure – – 60,599 375,581 403,071 403,071 357,996 409,922 406,427 Community Facilities – – 231 57,113 71,736 71,736 44,779 24,856 3,500 Sport and Recreation Facilities – – – – 800 800 15,000 15,000 55,000 Community Assets – – 231 57,113 72,536 72,536 59,779 39,856 58,500 Heritage Assets – – – – – – – – – Rev enue Generating – – – – – – – – – Non-rev enue Generating – – – – – – – – – Investment properties – – – – – – – – – Operational Buildings – – 1,225 – 1,225 1,225 3,750 7,000 6,000 Housing – – – – – – – – – Other Assets – – 1,225 – 1,225 1,225 3,750 7,000 6,000 Biological or Cultivated Assets – – – – – – – – – Serv itudes – – – – – – – – – Licences and Rights – – 1,179 – 3,650 3,650 34,000 23,000 26,000 Intangible Assets – – 1,179 – 3,650 3,650 34,000 23,000 26,000 Computer Equipment – – 346 – 3,330 3,330 – – – Furniture and Office Equipment – – 900 – 2,256 2,256 – – – Machinery and Equipment – – 1,047 – 892 892 280 – – Transport Assets – – 5,297 1,500 3,500 3,500 3,000 – – Land – – – – – – – – – Zoo's, Marine and Non-biological Animals – – – – – – – – – Total Renewal of Existing Assets 2 – – 178 44,030 50,919 50,919 31,939 30,120 – Roads Infrastructure – – – 16,017 24,017 24,017 14,868 20,000 – Storm water Infrastructure – – – – – – – – – Electrical Infrastructure – – – – – – – – – Water Supply Infrastructure – – 178 – – – – – – Sanitation Infrastructure – – – – – – – – – Solid Waste Infrastructure – – – – – – – – – Rail Infrastructure – – – 11,826 3,510 3,510 10,171 10,120 – Coastal Infrastructure – – – 11,038 16,042 16,042 – – – Information and Communication Infrastructure – – – – – – – – – Infrastructure – – 178 38,880 43,569 43,569 25,039 30,120 – Community Facilities – – – – 3,000 3,000 – – – Sport and Recreation Facilities – – – 400 600 600 4,900 – – Community Assets – – – 400 3,600 3,600 4,900 – – Heritage Assets – – – – – – – – – Rev enue Generating – – – – – – – – – Non-rev enue Generating – – – – – – – – – Investment properties – – – – – – – – – Operational Buildings – – – 4,750 3,750 3,750 2,000 – – Housing – – – – – – – – – Other Assets – – – 4,750 3,750 3,750 2,000 – – Biological or Cultivated Assets – – – – – – – – – Serv itudes – – – – – – – – – Licences and Rights – – – – – – – – – Intangible Assets – – – – – – – – – Computer Equipment – – – – – – – – – Furniture and Office Equipment – – – – – – – – – Machinery and Equipment – – – – – – – – – Transport Assets – – – – – – – – – Land – – – – – – – – – Zoo's, Marine and Non-biological Animals – – – – – – – – –

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Total Upgrading of Existing Assets 6 – – 29,122 152,369 201,895 201,895 191,618 187,048 274,500 Roads Infrastructure – – (5,585) 68,946 127,831 127,831 104,368 127,156 192,000 Storm water Infrastructure – – – – – – – – – Electrical Infrastructure – – – – 650 650 12,000 11,000 2,500 Water Supply Infrastructure – – 34,400 67,166 55,620 55,620 51,500 40,000 80,000 Sanitation Infrastructure – – – 6,500 7,000 7,000 8,000 2,000 – Solid Waste Infrastructure – – – – – – – – – Rail Infrastructure – – – – – – – – – Coastal Infrastructure – – – – – – – – – Information and Communication Infrastructure – – – – – – – – – Infrastructure – – 28,816 142,612 191,101 191,101 175,868 180,156 274,500 Community Facilities – – – 9,757 8,517 8,517 13,000 6,892 – Sport and Recreation Facilities – – – – – – – – – Community Assets – – – 9,757 8,517 8,517 13,000 6,892 – Heritage Assets – – – – – – – – – Rev enue Generating – – – – – – – – – Non-rev enue Generating – – – – – – – – – Investment properties – – – – – – – – – Operational Buildings – – 306 – 2,278 2,278 2,750 – – Housing – – – – – – – – – Other Assets – – 306 – 2,278 2,278 2,750 – – Biological or Cultivated Assets – – – – – – – – – Serv itudes – – – – – – – – – Licences and Rights – – – – – – – – – Intangible Assets – – – – – – – – – Computer Equipment – – – – – – – – – Furniture and Office Equipment – – – – – – – – – Machinery and Equipment – – – – – – – – – Transport Assets – – – – – – – – – Land – – – – – – – – – Zoo's, Marine and Non-biological Animals – – – – – – – – – Total Capital Expenditure 4 – – 100,123 630,592 743,275 743,275 682,362 696,946 771,427 Roads Infrastructure – – 29,107 281,457 386,153 386,153 354,320 416,378 474,727 Storm water Infrastructure – – 1,051 17,083 31,269 31,269 – – – Electrical Infrastructure – – 19,551 37,948 40,998 40,998 50,510 65,200 60,700 Water Supply Infrastructure – – 37,077 157,175 118,686 118,686 109,174 95,000 100,000 Sanitation Infrastructure – – 2,806 40,546 33,246 33,246 30,229 23,000 20,000 Solid Waste Infrastructure – – – – 7,337 7,337 3,500 10,000 25,000 Rail Infrastructure – – – 11,826 3,510 3,510 10,171 10,120 – Coastal Infrastructure – – – 11,038 16,042 16,042 – – – Information and Communication Infrastructure – – – – 500 500 1,000 500 500 Infrastructure – – 89,592 557,073 637,741 637,741 558,903 620,198 680,927 Community Facilities – – 231 66,869 83,253 83,253 57,779 31,748 3,500 Sport and Recreation Facilities – – – 400 1,400 1,400 19,900 15,000 55,000 Community Assets – – 231 67,269 84,653 84,653 77,679 46,748 58,500 Heritage Assets – – – – – – – – – Rev enue Generating – – – – – – – – – Non-rev enue Generating – – – – – – – – – Investment properties – – – – – – – – – Operational Buildings – – 1,531 4,750 7,253 7,253 8,500 7,000 6,000 Housing – – – – – – – – – Other Assets – – 1,531 4,750 7,253 7,253 8,500 7,000 6,000 Biological or Cultivated Assets – – – – – – – – – Serv itudes – – – – – – – – – Licences and Rights – – 1,179 – 3,650 3,650 34,000 23,000 26,000 Intangible Assets – – 1,179 – 3,650 3,650 34,000 23,000 26,000 Computer Equipment – – 346 – 3,330 3,330 – – – Furniture and Office Equipment – – 900 – 2,256 2,256 – – – Machinery and Equipment – – 1,047 – 892 892 280 – – Transport Assets – – 5,297 1,500 3,500 3,500 3,000 – – Land – – – – – – – – – Zoo's, Marine and Non-biological Animals – – – – – – – – – TOTAL CAPITAL EXPENDITURE - Asset class – – 100,123 630,592 743,275 743,275 682,362 696,946 771,427

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ASSET REGISTER SUMMARY - PPE (WDV) 5 – – 6,343,684 7,978,514 8,211,415 8,211,415 7,880,130 8,514,211 9,243,191 Roads Infrastructure – – 1,175,881 279,304 361,996 361,996 1,831,943 2,195,156 2,597,268 Storm water Infrastructure – – 360,683 17,083 31,269 31,269 – – – Electrical Infrastructure – – 590,546 37,948 39,898 39,898 621,938 675,138 723,838 Water Supply Infrastructure – – 1,490,556 157,175 118,686 118,686 1,560,736 1,664,736 1,795,025 Sanitation Infrastructure – – 662,893 7,044,316 7,152,344 7,152,344 665,661 688,661 708,661 Solid Waste Infrastructure – – 40,835 – 50 50 47,719 68,890 106,390 Rail Infrastructure – – – – – – 10,171 10,120 – Coastal Infrastructure Information and Communication Infrastructure – – 1,029 – 1,615 1,615 1,000 500 500 Infrastructure – – 4,322,423 7,535,826 7,705,859 7,705,859 4,739,168 5,303,201 5,931,682 Community Assets – – 17,493 80,029 112,203 112,203 964,738 1,006,987 1,075,487 Heritage Assets – – 2,302 – – – 2,302 2,302 2,302 Investment properties – – 332,431 – – – 332,431 332,431 332,431 Other Assets – – 888,671 349,828 376,876 376,876 1,028,920 1,035,720 1,041,720 Biological or Cultivated Assets Intangible Assets – – 15,097 12,831 14,132 14,132 50,126 71,126 97,126 Computer Equipment – – 20,125 – – – 20,125 20,125 20,125 Furniture and Office Equipment – – 30,887 – 457 457 33,642 33,642 33,642 Machinery and Equipment – – 31,954 – 789 789 27,365 27,365 27,365 Transport Assets – – 41,251 – – – 43,645 43,645 43,645 Land – – 641,051 – 1,100 1,100 637,667 637,667 637,667 Zoo's, Marine and Non-biological Animals TOTAL ASSET REGISTER SUMMARY - PPE (WDV) 5 – – 6,343,684 7,978,514 8,211,415 8,211,415 7,880,130 8,514,211 9,243,191 EXPENDITURE OTHER ITEMS – – 544,443 556,395 549,046 549,046 560,242 608,824 637,442 Depreciation 7 – – 502,874 540,557 539,057 539,057 545,585 595,964 625,762 Repairs and Maintenance by Asset Class 3 – – 41,568 15,838 9,989 9,989 14,657 12,860 11,679 Roads Infrastructure – – – – – – – – – Storm water Infrastructure – – – – – – – – – Electrical Infrastructure – – 7,253 13,210 8,077 8,077 11,417 10,092 9,184 Water Supply Infrastructure – – – – – – – – – Sanitation Infrastructure – – – – – – – – – Solid Waste Infrastructure – – 33,232 1,500 500 500 1,275 1,084 975 Rail Infrastructure – – 1 223 140 140 196 181 166 Coastal Infrastructure – – – – – – – – – Information and Communication Infrastructure – – – 380 247 247 323 275 247 Infrastructure – – 40,485 15,313 8,964 8,964 13,211 11,631 10,573 Community Facilities – – 592 525 1,025 1,025 446 379 341 Sport and Recreation Facilities – – – – – – – – – Community Assets – – 592 525 1,025 1,025 446 379 341 Heritage Assets – – – – – – – – – Rev enue Generating – – – – – – – – – Non-rev enue Generating – – – – – – – – – Investment properties – – – – – – – – – Operational Buildings – – – – – – 1,000 850 765 Housing – – – – – – – – – Other Assets – – – – – – 1,000 850 765 Biological or Cultivated Assets – – – – – – – – – Serv itudes – – – – – – – – – Licences and Rights – – – – – – – – – Intangible Assets – – – – – – – – – Computer Equipment – – – – – – – – – Furniture and Office Equipment – – – – – – – – – Machinery and Equipment – – 491 – – – – – – Transport Assets – – – – – – – – – Land – – – – – – – – – Zoo's, Marine and Non-biological Animals – – – – – – – – – TOTAL EXPENDITURE OTHER ITEMS – – 544,443 556,395 549,046 549,046 560,242 608,824 637,442

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Explanatory notes to Table A10 - Basic Service Delivery Measurement

1. It is anticipated that these Free Basic Services will cost the City R201 million in 2019/2020. This is covered by the City’s equitable share allocation from national government. 2. In addition to the Free Basic Services, the City also ‘gives’ households R201 million in free services in 2019/2020. MP326 City of Mbombela - Table A10 Basic service delivery measurement 2019/20 Medium Term Revenue & 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Description Ref Original Adjusted Full Year Budget Year Budget Year Budget Year Outcome Outcome Outcome Budget Budget Forecast 2019/20 +1 2020/21 +2 2021/22 Household service targets 1 Water: Piped w ater inside dw elling – 119,394 119,394 119,394 119,394 119,394 119,394 119,394 119,394 Piped w ater inside y ard (but not in dw elling) – 25,123 25,123 25,123 25,123 25,123 25,123 25,123 25,123 Using public tap (at least min.serv ice lev el) 2 – – – – – – – – – Other w ater supply (at least min.serv ice lev el) 4 – – – – – – – – – Minimum Service Level and Above sub-total – 144,517 144,517 144,517 144,517 144,517 144,517 144,517 144,517 Using public tap (< min.serv ice lev el) 3 – – – – – – – – – Other w ater supply (< min.serv ice lev el) 4 – – – – – – – – – No w ater supply – 36,849 36,849 36,849 36,849 36,849 36,849 36,849 36,849 Below Minimum Service Level sub-total – 36,849 36,849 36,849 36,849 36,849 36,849 36,849 36,849 Total number of households 5 – 181,366 181,366 181,366 181,366 181,366 181,366 181,366 181,366 Sanitation/sewerage: Flush toilet (connected to sew erage) – 74,171 74,171 81,588 81,588 81,588 89,747 89,747 89,747 Flush toilet (w ith septic tank) – – – – – – – – – Chemical toilet – – – – – – – – – Pit toilet (v entilated) – 114,164 114,164 102,748 102,748 102,748 92,473 78,602 78,602 Other toilet prov isions (> min.serv ice lev el) – – – – – – – – – Minimum Service Level and Above sub-total – 188,335 188,335 184,336 184,336 184,336 182,220 168,349 168,349 Bucket toilet – – – – – – – – – Other toilet prov isions (< min.serv ice lev el) – – – – – – – – – No toilet prov isions – – 17,801 17,801 17,801 17,801 17,801 17,801 17,801 Below Minimum Service Level sub-total – – 17,801 17,801 17,801 17,801 17,801 17,801 17,801 Total number of households 5 – 188,335 206,136 202,137 202,137 202,137 200,021 186,150 186,150 Energy: Electricity (at least min.serv ice lev el) – 190,065 190,065 209,072 209,072 209,072 229,979 252,977 278,274 Electricity - prepaid (min.serv ice lev el) – – – – – – – – – Minimum Service Level and Above sub-total – 190,065 190,065 209,072 209,072 209,072 229,979 252,977 278,274 Electricity (< min.serv ice lev el) – – – – – – – – – Electricity - prepaid (< min. serv ice lev el) – – – – – – – – – Other energy sources – – 16,071 16,071 16,071 16,071 16,071 16,071 16,071 Below Minimum Service Level sub-total – – 16,071 16,071 16,071 16,071 16,071 16,071 16,071 Total number of households 5 – 190,065 206,136 225,143 225,143 225,143 246,050 269,048 294,345 Refuse: Remov ed at least once a w eek – 64,027 64,027 64,027 64,027 64,027 64,027 64,027 64,027 Minimum Service Level and Above sub-total – 64,027 64,027 64,027 64,027 64,027 64,027 64,027 64,027 Remov ed less frequently than once a w eek – – – – – – – – – Using communal refuse dump – 133,170 133,170 133,170 133,170 133,170 133,170 133,170 133,170 Using ow n refuse dump – – – – – – – – – Other rubbish disposal – – – – – – – – – No rubbish disposal – 8,939 8,939 8,939 8,939 8,939 8,939 8,939 8,939 Below Minimum Service Level sub-total – 142,109 142,109 142,109 142,109 142,109 142,109 142,109 142,109 Total number of households 5 – 206,136 206,136 206,136 206,136 206,136 206,136 206,136 206,136

Households receiving Free Basic Service 7 Water (6 kilolitres per household per month) – 12,037 12,037 9,953 9,953 9,953 11,906 11,906 11,906 Sanitation (free minimum lev el serv ice) – 12,037 12,037 9,953 9,953 9,953 11,906 11,906 11,906 Electricity /other energy (50kw h per household per month) – 12,037 12,037 9,953 9,953 9,953 11,906 11,906 11,906 Refuse (remov ed at least once a w eek) – 12,037 12,037 9,953 9,953 9,953 11,906 11,906 11,906 Cost of Free Basic Services provided - Formal Settlements (R'000) 8 Water (6 kilolitres per indigent household per month) – 9,126 6,101 46,309 46,309 46,309 48,624 51,056 53,608 Sanitation (free sanitation serv ice to indigent households) – 9,126 9,126 14,369 14,369 14,369 12,187 13,053 13,966 Electricity /other energy (50kw h per indigent household per month) – 5,850 52 45,041 45,041 45,041 47,293 49,657 52,140 Refuse (remov ed once a w eek for indigent households) – 13,112 13,112 14,009 14,009 14,009 14,710 15,445 16,218 Cost of Free Basic Services provided - Informal Formal Settlements (R'000) – – – 74,508 74,633 74,633 78,496 81,303 84,239 Total cost of FBS provided – 37,214 28,391 194,236 194,361 194,361 201,310 210,514 220,172 Highest level of free service provided per household Property rates (R v alue threshold) 80,000 80,000 80,000 80,000 80,000 100,000 100,000 100,000 Water (kilolitres per household per month) 6 6 6 6 6 6 6 6 Sanitation (kilolitres per household per month) 6 6 6 6 6 6 6 6 Sanitation (Rand per household per month) – – – – – – – – Electricity (kw h per household per month) 50 50 50 50 50 50 50 50 Refuse (av erage litres per w eek) 1 1 1 1 1 1 1 1 Revenue cost of subsidised services provided (R'000) 9

Property rates (tariff adjustment) ( impermissable values per section 17 of MPRA) Property rates ex emptions, reductions and rebates and impermissable values in excess of section 17 of MPRA) – 187,560 220,176 220,263 220,263 220,263 63,135 66,544 70,138 Water (in excess of 6 kilolitres per indigent household per month) – 22,910 – 19,153 19,153 19,153 20,110 21,116 22,172 Sanitation (in excess of free sanitation service to indigent households) – 27,865 28,738 28,738 28,738 28,738 30,175 31,683 33,268 Electricity /other energy (in excess of 50 kwh per indigent household per month) – 48,600 – 40,068 40,068 40,068 42,071 44,175 46,384 Refuse (in excess of one removal a week for indigent households) – – – – – – – – – Municipal Housing - rental rebates Housing - top structure subsidies 6 Other Total revenue cost of subsidised services provided – 286,935 248,914 308,221 308,221 308,221 155,491 163,518 171,961

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PART 2 – SUPPORTING DOCUMENTATION

2.1 2019/2020 OVERVIEW OF THE ANNUAL BUDGET PROCESS

Section 53 of the MFMA requires the Mayor of the City to provide general political guidance in the budget process and the setting of priorities that must guide the preparation of the budget. In addition Chapter 2 of the Municipal Budget and Reporting Regulations states that the Mayor of the City must establish a Budget Steering Committee to provide technical assistance to the Mayor in discharging the responsibilities set out in section 53 of the Act.

The Budget Steering Committee consists of the Municipal Manager and senior officials of the City meeting under the chairpersonship of the MMC for Finance.

The primary aim of the Budget Steering Committee is to ensure:

(a) that the process followed to compile the budget complies with legislation and good budget practices; (b) that there is proper alignment between the policy and service delivery priorities set out in the City’s IDP and the budget, taking into account the need to protect the financial sustainability of City; (c) that the City’s revenue and tariff setting strategies ensure that the cash resources needed to deliver services are available; and (d) That the various spending priorities of the different municipal departments are properly evaluated and prioritised in the allocation of resources.

2.1.1 IDP/Budget process overview

In terms of section 21 of the MFMA the Mayor is required to table in Council ten months before the start of the new financial year (i.e. in August 2018) a time schedule that sets out the process to revise the IDP and prepare the budget.

The process that was followed to guide the review of the City of Mbombela’s 2019-2020 financial year involved various phases which had their respective outcomes. The phases include preparation, analysis, strategies, projects, integration and approval phases

(a) Planning Phase

The City of Mbombela Municipal Council, under Council Resolution No. A1/2018, adopted an IDP/budget Process Plan on the 31st of August 2018. The IDP/budget Process Plan outlined the legislative framework, institutional structures to guide, manage and monitor the IDP Review processes, mechanisms for community participation as well as key deadlines of the activities that led to the finalisation of the IDP for the 2019-2020 financial year.

The Process Plan was developed in line with the Ehlanzeni District Municipality’s IDP Framework Plan adopted for the entire district after consultations with the local municipalities, including the City of Mbombela.

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The Process Plan was advertised on the Mpumalanga News dated 13 September 2018 in order to give notice to the affected stakeholders and the community members. The Process Plan was also placed on the Municipality’s website and placed in all the Regional Service Centres of the Municipality. Briefing sessions on the adopted IDP Process Plan were also held with the various stakeholders including Ward Committees, Traditional Leadership and organised business such as Mbombela Economic Development Partnership (MEDP), Kruger Lowveld Chamber of Business and Tourism (KLCBT), Sappi-Lomati, Barberton Mines, South Africa Property Owners Association (SAPOA), BATOBIC, etc.

(b) Analysis Phase

During this phase, it was critical for the municipality to understand the current existing situation within the municipal area. An in depth diagnostic assessment was done by the Municipality in relation to the levels of development, service delivery gaps or challenges, causes of existing problems, identification of priority issues (issues that needed to be addressed first), and available resources to help deal with identified challenges or problems. Sources of information that were used as baseline include annual reports, mid-year performance report, Service Delivery and Budget Implementation Plan (SDBIP) quarterly reports, StatsSA Community Survey 2016, and SERO reports. Sector plans were also used to inform the planning of the IDP in terms what programmes or projects needs to be implemented to address the service delivery gaps within the municipal area. The GIS system was also used in identifying communities that do not have access to municipal basic services within the municipal area. The information obtained through this process helped the municipality to identify priority issues according to the Municipality’s perspective. A further prognosis was done in terms of the internal institutional gaps or needs (i.e. shortage of staff, governance issues, etc.) as well as internal resources (revenue generation capacity, ICT infrastructure, etc.) that may assist in addressing the identified priority issues. A consultation process also took place during this phase whereby zonal consultation meetings were held from the 18th until the 26st of October 2018 in each of the four Regions of the City of Mbombela. During the zonal meetings, various wards represented in each zone had an opportunity to interrogate their ward priorities which they raised during the previous IDP analysis phase as well as raise other issues affecting each ward/zone. A progress report was also given by the Municipality in terms of the implementation of programs and projects that speak to the ward priorities proposed during the development of the five year IDP (IDP 2017 – 2022). Meetings with the Traditional Leadership, Organized Business stakeholders and Transport Fraternity (Taxi Associations, Buscor, etc.) were held on the 17th and the 19th of October 2018 respectively to raise issues affecting them. The ward priorities are detailed in table 1.4.1 whilst the other issues raised during the various consultative meetings by the different wards, Traditional Leadership, Organised Business and Transport Fraternity are listed in table 1.4.2 below.

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The City of Mbombela had its strategic planning sessions to devise means to respond to the priority issues identified during the analysis phase. Departmental strategic planning sessions were held from 12 November 2018 to 23 November 2018. Departments reviewed their strategies and objectives taking into consideration the results of the internal assessment of the Municipality. Furthermore, departments identified programmes and projects which might be critical to respond to the ward priorities as well as the institutional needs.

(d) Project Phase

The project phase involved Municipal Departments designing programmes and projects with clear targets and indicators which are specific, measurable, achievable, realistic and time- bound. The location, beneficiaries, as well as project costing was also done. These programmes and projects were informed by the ward priorities, the Municipality Vision 2030, sector plans, policy imperatives and planning requirements from the national and provincial spheres of government. The programmes and projects devised also gave effect to national priorities as pronounced during the State of the National Address (SONA) and State of the Province Address (SOPA) respectively.

(e) Integration Phase

During this phase, the Municipality held institutional Technical Lekgotla chaired by the Municipal Manager from 05 to 06 December 2018 and Mayoral Lekgotla chaired by the Executive Mayor on the 7th and 8th of March 2019. The aim of these sessions was to align and integrate departmental programmes and projects as well as to devise interventions that will assist in the attainment of the Municipality’s programmes/projects objectives and outcomes that responds to the IDP priorities. The aim was also to ensure that all efforts are directed towards the realisation of the Municipality long-term plan (i.e. City of Mbombela Vision 2030). During this phase, the Municipality aligned its five year programs with its financial resources (Budget/MTREF) and also with its performance management system. During this phase, an operational plan (SDBIP) was also developed to track performance on planned activities in relation to budgeted projects. Sessions with sector departments were also held, through platforms created by Ehlanzeni District Municipality (EDM) and Provincial Department of Cooperative Governance and Traditional Affairs (COGTA), to integrate programmes and projects of all the local municipalities in Ehlanzeni district with that of the provincial and national sector departments, as well as state-owned enterprises (SOE’s) such as ESKOM and other private companies i.e. Barberton Mines, etc. Hence, projects from provincial and national sector departments, private sector and state parastatals are also incorporated in this reviewed IDP. This was to ensure that there is vertical alignment of plans and programs aimed at achieving national and provincial policy imperatives, strategies and plans (i.e. National Development Plan, Medium-

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Term Strategic Framework, Mpumalanga Province Vision 2030, Mpumalanga Economic Development Path, etc.).

(f) Public Participation and consultative process

As part of the consultative process, the municipality also have a benchmark engagement meeting with the National Treasury on April 2019 with regard to the adopted final IDP/budget and 2019/2020- 2021/2022 Budget and Medium Term Revenue and Expenditure Framework (MTREF). The benchmark engagement exercise will be conducted by the National Treasury with an objective of assessing the credibility of the final IDP and budget adopted by the municipal council.

Approval Phase

The final 2019/2020 IDP and Budget will be tabled before council for approval on the 31 May 2019. The notice will be advertised on local print media on the June 2019. Moreover, the documents will be placed on the municipal website, in all the 4 Regions of the City i.e Head Office, Central, Northern, Southern, Eastern and in all Libraries on the 14 June 2019 for public awareness on the approved IDP and Budget.

2.1.2 IDP and service delivery and budget implementation plan

It started in August 2018 after the tabling of the IDP Process Plan and the Budget Time Schedule for the 2019/2020 MTREF.

The City’s IDP is its principal strategic planning instrument, which directly guides and informs its planning, budget, management and development actions. This framework is rolled out into objectives, key performance indicators and targets for implementation which directly inform the Service Delivery and Budget Implementation Plan. The Process Plan applicable to the fourth revision cycle included the following key IDP processes and deliverables:

(a) Registration of community needs; (b) Compilation of departmental business plans including key performance indicators and targets; (c) Financial planning and budgeting process; (d) Public participation process; (e) Compilation of the SDBIP, and (f) The review of the performance management and monitoring processes.

The IDP has been taken into a business and financial planning process leading up to the 2019/2020 MTREF, based on the approved 2018/2019 MTREF, Mid-year Review and adjustments budget. The business planning process has subsequently been refined in the light of current economic circumstances and the resulting revenue projections.

With the compilation of the 2019/2020 MTREF, each department/function had to review the business planning process, including the setting of priorities and targets after reviewing the mid-year and third quarter performance against the 2018/2019 Departmental Service Delivery 2019/2020 – 2021/2022 Approved Final Budget and Medium Term Revenue and Expenditure Framework Page 84

and Budget Implementation Plan. Business planning links back to priority needs and master planning, and essentially informed the detail operating budget appropriations and three-year capital programme.

2.1.3 Financial modelling and key planning drivers

As part of the compilation of the 2019/2020 MTREF, extensive financial modelling was undertaken to ensure affordability and long-term financial sustainability. The following key factors and planning strategies have informed the compilation of the 2019/2020 – 2021/2022 annual budget and MTREF:

(a) City’s growth (b) Policy priorities and strategic objectives (c) Asset maintenance (d) Economic climate and trends (i.e. inflation, Eskom increases, household debt, migration patterns) (e) Performance trends (f) The approved 2018/2019 adjustments budget and performance against the SDBIP (g) Cash Flow Management (h) Debtor payment levels (i) Loan and investment possibilities (j) The need for tariff increases versus the ability of the community to pay for services (k) Improved and sustainable service delivery

In addition to the above, the strategic guidance given in National Treasury’s MFMA Circulars in relation to municipal budget process has been taken into consideration in the planning and prioritisation process.

2.1.4 Community consultation

Chapter 4 of the Municipal Systems Act states that municipalities must develop a culture of municipal governance that complements formal representative government with a system of participatory governance, and must encourage, and create conditions for the local community to participate in the affairs of the City including the preparation, implementation and review of its IDP, Budget and Performance Management System. It furthermore states that participation by the local community must take place through Political Structures, Ward Committees and Councilors. In compliance to this, MLM has adopted Public participation policy, Community Based Planning policy and policy on Ward

2.1.5 Committees and participation

The participation of communities is driven through a Ward Committee System managed by the Public Participation Unit in the Office of the Speaker and the IDP Representative Forum. The central role of Ward Committees is to facilitate local community participation in decisions which affect the local community, to articulate local community interests and to represent these interests within the municipal governing structures. City’s public participation process comprises of registration of ward needs, specific Ward Imbizo(s) and participation sessions and comments on the IDP.

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Key to the participation process is a Needs Database developed per ward and managed by the Office of the Executive Mayor and Municipal Manager through the Strategic Management Services department (IDP Unit). This database comprises of an inventory of development issues and needs recorded in each of the wards in the City of Mbombela over a number of years. This Needs Database serves as the basis for community consultation and participation in the City and as inputs to the Departmental Business Planning process. During each annual IDP review process, Ward Committees and Ward Councilors are given an opportunity to update the priority issues and needs for their specific ward areas. This process takes place at the beginning of the revision process. The updated Needs Database informs the business plan formulation process conducted by various line functional departments of the City.

All documents in the appropriate format (electronic and printed) will be provided to National Treasury, and other national and provincial departments in accordance with section 23 of the MFMA.

2.2 OVERVIEW OF ALIGNMENT OF ANNUAL BUDGET WITH THE IDP

The Constitution mandates local government with the responsibility to exercise local developmental and cooperative governance. The eradication of imbalances in South African society can only be realized through a credible integrated developmental planning process.

Municipalities in South Africa need to utilise integrated development planning as a method to plan future development in their areas and so find the best solutions to achieve sound long- term development goals. A municipal IDP provides a five year strategic programme of action aimed at setting short, medium and long term strategic and budget priorities to create a development platform, which correlates with the term of office of the political incumbents. The plan aligns the resources and the capacity of a City to its overall development aims and guides the municipal budget. An IDP is therefore a key instrument which municipalities use to provide vision, leadership and direction to all those that have a role to play in the development of a municipal area. The IDP enables municipalities to make the best use of scarce resources and speed up service delivery.

Integrated developmental planning in the South African context is amongst others, an approach to planning aimed at involving the City and the community to jointly find the best solutions towards sustainable development. Furthermore, integrated development planning provides a strategic environment for managing and guiding all planning, development and decision making in the City.

It is important that the IDP developed by municipalities correlate with National and Provincial intent. It must aim to co-ordinate the work of local and other spheres of government in a coherent plan to improve the quality of life for all the people living in that area. Applied to the City, issues of national and provincial importance should be reflected in the IDP of the City. A clear understanding of such intent is therefore imperative to ensure that the City strategically complies with the key national and provincial priorities.

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The aim of this revision cycle was to develop and coordinate a coherent plan to improve the quality of life for all the people living in the area, also reflecting issues of national and provincial importance. One of the key objectives is therefore to ensure that there exists alignment between national and provincial priorities, policies and strategies and the City’s response to these requirements.

The national and provincial priorities, policies and strategies of importance include amongst others:

(a) Green Paper on National Strategic Planning of 2009; (b) Government Program of Action; (c) Development Facilitation Act of 1995; (d) Provincial Growth and Development Strategy (GGDS); (e) National and Provincial spatial development perspectives; (f) Relevant sector plans such as transportation, legislation and policy; (g) National Key Performance Indicators (NKPIs); (h) Accelerated and Shared Growth Initiative (ASGISA); (i) National 2014 Vision; (j) National Spatial Development Perspective (NSDP); and (k) The National Priority Outcomes.

2.2.1 National priorities

The President on his 2019 State of the Nation Address mentioned five national priorities which should embedded by all spheres of government on the planning and budgeting processes for the medium-term. The government has introduced the New Growth Plan that will guide the work of all spheres of government in achieving the goals relating these national priorities within the premise that the creation of decent work is at the Centre of our economic policies.

The five national priorities are;

(a) Creating decent jobs; (b) Improving the quality of education; (c) Enhancing health services; (d) Enhancing rural development and agrarian; and (e) Fight against crime and corruption.

In His address, the President has further declared 2019 as a year of job creation and investment. The municipalities should align their programs with the job creation imperative.

To achieve this national priority, municipalities are urged when finalising 2019/2020 budgets to explore opportunities to mainstream labour intensive approaches to delivering services, and more particularly to participate fully in the EPWP. The City ought to focus on maximizing its contribution to job creation by;

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(b) Ensuring that service providers use labour intensive approaches. (c) Supporting labour intensive LED projects. (d) Participating fully in the EPWP/National youth service plan NYDP. (e) Implementing interns programs to provide young people with on-the-job training

The Constitution requires local government to relate its management, budgeting and planning functions to achieve its objectives. This gives a clear indication of the intended purposes of municipal integrated development planning. Legislation stipulates clearly that a City must not only give effect to its IDP, but must also conduct its affairs in a manner which is consistent with its IDP. The following table highlights the IDP’s seven strategic objectives for the 2019/2020 MTREF and further planning refinements that have directly informed the compilation of the budget:

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2.2.2 IDP strategic objectives

The City’s development priority and objectives

IDP Development IDP Development objective priority

Institutional development  To build strong sustainable governance and institutional and transformation structures and arrangements  To redefine strategic macro leadership and coordination structures involving the local, district, provincial and national government

Infrastructure and  To strengthen the delivery of basic services and ensure sustainable services sustainable integrated human settlement supported by infrastructure development

Rural Development  To strengthen the delivery of basic services and ensure sustained integrated human settlement supported by infrastructure development  To formulate a broad over-arching human capital and community development

Economic development  To initiate a strong and sustainable local/regional economic development potential and sustainable environmental management

Financial management  To ensure legally sound financial viability and and viability management

Human capital and  To formulate a broad over-arching human capital and community development community development

2010 Legacy and  To initiate a strong and sustainable local/regional Flagship projects economic development potential and sustainable concept environmental management  To strengthen the delivery of basic services and ensure sustained integrated human settlement supported by infrastructure development  To formulate a broad over-arching human capital and community development

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 To build strong sustainable governance and institutional structures and arrangements  To redefine strategic macro leadership and coordination structures involving the local, district, provincial and national government

In order to ensure integrated and focused service delivery between all spheres of government it was important for the City to align its budget priorities with that of national and provincial government. All spheres of government place a high priority on infrastructure development, economic development and job creation, efficient service delivery, poverty alleviation and building sound institutional arrangements.

Local priorities were identified as part of the IDP review process which is directly aligned to that of the national and provincial priorities. The key performance areas can be summarised as follows against the seven strategic objectives:

Alignment of City of Mbombela’s IDP priorities with National, Provincial and District Priorities

MILLENNIUM IDP PRIORITIES- MUNICIPAL RESPONSE DEVELOPMENT GOALS Develop a Global Partnership  2010 legacy and flagship projects for Development  Human capital and community development Eradicate extreme poverty and  Infrastructure & sustainable services hunger  Human capital and community development  Economic development  Rural development Combat HIV/AIDS, malaria and  Human capital and community development other diseases  2010 legacy and flagship projects  Economic development Ensure environmental  2010 legacy and flagship projects sustainability Promote gender equality and  Human capital and social development empower women  2010 legacy and flagship projects NATIONAL PRIORITIES IDP PRIORITIES- MUNICIPAL RESPONSE Corruption  2010 legacy and flagship projects Education  Human capital and community development Health  2010 legacy and flagship projects

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The fight against crime  2010 legacy and flagship projects  Rural development Creation of decent work &  Economic development sustainable livelihoods  Infrastructure & sustainable services  2010 legacy and flagship projects  Rural development Rural development, food  Economic development security & land reform  Infrastructure & sustainable services  Human capital and community development  Rural development PROVINCIAL PRIORITIES IDP PRIORITIES- MUNICIPAL RESPONSE

Agriculture  Human capital and community development  Economic development  Rural development Skills  Human capital and community development  Institutional development & transformation  Infrastructure & sustainable services Economic growth & job  Economic development creation  2010 legacy and flagship projects  Rural development Strategic infrastructure  2010 legacy and flagship projects  Infrastructure & sustainable services Tourism, Environment &  Human capital & community development Cultural Heritage  Flagship projects  Social cohesion  Human capital and community development  2010 legacy and flagship projects

DISTRICT PRIORITIES IDP PRIORITIES- MUNICIPAL RESPONSE

Basic service and infrastructure  Infrastructure & sustainable services development Local economic development  Economic development  2010 legacy and flagship projects Institutional transformation and  Institutional development and transformation development  2010 legacy and flagship projects

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Financial viability and  2010 legacy and flagship projects management  Financial management and viability Public participation and good  Institutional development and transformation governance  2010 legacy and flagship projects Traditional leaders  Human capital and community development  2010 legacy and flagship projects

In line with the MSA, the IDP constitutes a single, inclusive strategic plan for the City. The five-year programme responds to the development challenges and opportunities faced by the City by identifying the key performance areas to achieve the seven strategic objectives mentioned above.

In addition to the five-year IDP, the City undertakes an extensive planning and developmental strategy which primarily focuses on a longer-term horizon; 15 to 20 years. This process is aimed at influencing the development path by proposing a substantial programme of public- led investment to restructure current patterns of settlement, activity and access to resources in the City so as to promote greater equity and enhanced opportunity. The strategy specifically targets future developmental opportunities in traditional dormitory settlements. It provides direction to the City’s IDP, associated sectoral plans and strategies, and the allocation of resources of the City and other service delivery partners.

This development strategy introduces important policy shifts which have further been translated into six strategic focus areas/objectives as outlined below:

(a) To initiate a strong and sustainable Local/Regional Economic Development Potential and Sustainable Environmental Management (b) To Strengthen the Delivery of Basic Services and ensure Sustained Integrated Human Settlement supported by Infrastructure Development (c) To formulate a Broad Over-arching Human Capital and Community Development (d) To build strong sustainable governance and institutional structures and arrangements (e) To ensure legally sound financial viability and management (f) To redefine strategic macro leadership and coordination structures involving the Local, District, Provincial and National Government

Lessons learned with previous IDP revision and planning cycles as well as changing environments were taken into consideration in the revision of the IDP, including:

(a) During the consultation, communities were given an opportunity to identify key priority needs and suggest solutions;

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(b) Diverse developmental needs in areas within each ward were noted during the Analysis phase (c) Poor attendance in some wards during the consultation meetings has negative effects; (d) Consultation with communities for their needs is not the analysis of needs; analysis requires further research, evaluation and a decision making process; (e) Communities should be provided with maps of their areas during consultation process to assist the City in mapping social needs; (f) Government departments and parastatals are not attending IDP meetings even though they are invited; (g) Upon the approval of the IDP and Budget, each ward should receive information of all projects/ programs across the three spheres of government and other stakeholders that will be implemented in their respective wards; (h) There is a need for an organized consultation process with sector departments from both the City and district perspective.

The 2019/2020 – 2021/2022 final budget and MTREF has therefore been directly informed by the IDP revision process and the following tables provide a reconciliation between the IDP strategic objectives and operating revenue, operating expenditure and capital expenditure.

MP326 City of Mbombela - Supporting Table SA4 Reconciliation of IDP strategic objectives and budget (revenue) Goal 2019/20 Medium Term Revenue & Strategic Objective Goal 2015/16 2016/17 2017/18 Current Year 2018/19 Code Expenditure Framework Ref Audited Audited Audited Original Adjusted Full Year Budget Year Budget Year Budget Year R thousand Outcome Outcome Outcome Budget Budget Forecast 2019/20 +1 2020/21 +2 2021/22 ENERGY – – 886,749 944,844 964,844 964,844 1,119,034 1,205,098 1,291,980 WATER AND SANITATION – – 119,648 126,477 127,477 127,477 130,824 141,198 152,536 PUBLIC SAFETY – – 44,715 206,930 195,930 195,930 8,565 9,422 10,364 PUBLIC WORKS, ROADS – – 140,952 68,022 68,022 68,022 5,836 – – AND TRANSPORT COMMUNITY SERVICES – – 106,456 120,704 121,704 121,704 133,002 143,595 155,181 REGIONAL CENTRE – – – – – – – – – COORDINATION LEGAL SERVICES – – – – – – – – – FINANCIAL MANAGEMENT – – 1,158,232 1,320,503 1,330,558 1,330,558 1,428,589 1,538,179 1,658,893 STRATEGIC MANAGEMENT – – – – – – – – – SERVICES CORPORATE SERVICES – – 1,857 598 598 598 658 724 797 DEPARTMENT

CITY PLANNING AND – – 13,005 7,591 22,591 22,591 28,151 30,966 34,062 DEVELOPMENT DEPARTMENT MUNICIPAL MANAGER – – 6,349 4,223 3,223 3,223 9,248 10,074 10,986 OFFICE OF COUNCIL – – – 594 594 594 653 718 790 COUNCIL – – (6) 5 5 5 6 7 7 Allocations to other priorities 2 Total Revenue (excluding capital transfers and contributions) 1 – – 2,477,958 2,800,491 2,835,546 2,835,546 2,864,567 3,079,980 3,315,597

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MP326 City of Mbombela - Supporting Table SA5 Reconciliation of IDP strategic objectives and budget (operating expenditure) Goal 2019/20 Medium Term Revenue & Strategic Objective Goal 2015/16 2016/17 2017/18 Current Year 2018/19 Code Expenditure Framework Ref Audited Audited Audited Original Adjusted Full Year Budget Year Budget Year Budget Year R thousand Outcome Outcome Outcome Budget Budget Forecast 2019/20 +1 2020/21 +2 2021/22 ENERGY – – 793,890 874,459 814,367 814,367 942,942 1,005,149 1,074,889

WATER AND SANITATION – – 367,349 346,146 324,697 324,697 344,726 346,638 354,705

PUBLIC SAFETY – – 181,813 331,961 323,199 323,199 275,944 285,740 295,394

PUBLIC WORKS, ROADS – – 239,038 430,509 446,942 446,942 408,461 433,498 446,085 AND TRANSPORT

COMMUNITY SERVICES – – 465,098 453,423 522,547 522,547 472,771 493,339 520,538

REGIONAL CENTRE – – 20,019 21,558 37,109 37,109 22,445 21,821 21,834 COORDINATION

LEGAL SERVICES – – 5,444 2,071 6,277 6,277 2,623 2,346 2,204

FINANCIAL MANAGEMENT – – 263,221 255,737 217,125 217,125 244,260 249,380 255,325

STRATEGIC MANAGEMENT – – 32,357 40,130 43,330 43,330 41,498 42,786 44,454 SERVICES

CORPORATE SERVICES – – 197,741 122,971 124,471 124,471 163,338 163,030 165,122 DEPARTMENT

CITY PLANNING AND – – 308,603 119,169 117,257 117,257 118,333 120,687 124,779 DEVELOPMENT DEPARTMENT

MUNICIPAL MANAGER – – 93,259 113,767 123,918 123,918 113,003 113,249 116,181

OFFICE OF COUNCIL – – 22,092 28,414 26,808 26,808 28,706 28,995 29,624

COUNCIL – – 119,545 69,965 68,242 68,242 70,876 72,528 74,904

Allocations to other priorities Total Expenditure 1 – – 3,109,470 3,210,279 3,196,290 3,196,290 3,249,926 3,379,187 3,526,037

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2.3 MEASURABLE PERFORMANCE OBJECTIVES AND INDICATORS

Performance Management is a system intended to manage and monitor service delivery progress against the identified strategic objectives and priorities. In accordance with legislative requirements and good business practices as informed by the National Framework for Managing Programme Performance Information, the City has developed and implemented a performance management system of which system is constantly refined as the integrated planning process unfolds. The City targets, monitors, assess and reviews organisational performance which in turn is directly linked to individual employee’s performance.

At any given time within government, information from multiple years is being considered; plans and budgets for next year; implementation for the current year; and reporting on last year's performance. Although performance information is reported publicly during the last stage, the performance information process begins when policies are being developed, and continues through each of the planning, budgeting, implementation and reporting stages. The planning, budgeting and reporting cycle can be graphically illustrated as follows:

Figure 1 Planning, budgeting and reporting cycle

The performance of the City relates directly to the extent to which it has achieved success in realising its goals and objectives, complied with legislative requirements and meeting stakeholder expectations. The City therefore has adopted one integrated performance management system which encompasses:

(a) Planning (setting goals, objectives, targets and benchmarks); (b) Monitoring (regular monitoring and checking on the progress against plan); (c) Measurement (indicators of success); (d) Review (identifying areas requiring change and improvement);

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(e) Reporting (what information, to whom, from whom, how often and for what purpose); and (f) Improvement (making changes where necessary).

The performance information concepts used by the City in its integrated performance management system are aligned to the Framework of Managing Programme Performance Information issued by the National Treasury.

The following table sets out the City’s main performance objectives and benchmarks for the 2019/2020 MTREF.

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MP326 City of Mbombela - Supporting Table SA8 Performance indicators and benchmarks 2019/20 Medium Term Revenue & 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Description of financial indicator Basis of calculation Audited Audited Audited Original Adjusted Full Year Pre-audit Budget Year Budget Year Budget Year Outcome Outcome Outcome Budget Budget Forecast outcome 2019/20 +1 2020/21 +2 2021/22

Borrowing Management

Credit Rating Baa1.za Baa1.za Baa1.za Baa1.za Baa1.za Baa1.za Capital Charges to Operating Ex penditure Interest & Principal Paid /Operating 0.0% 0.0% 2.3% 2.1% 3.2% 3.2% 3.2% 2.3% 2.4% 2.4% Ex penditure Capital Charges to Ow n Rev enue Finance charges & Repay ment of 0.0% 0.0% 4.2% 3.3% 4.8% 4.8% 5.1% 3.5% 3.5% 3.5% borrow ing /Ow n Rev enue Borrow ed funding of 'ow n' capital ex penditure Borrow ing/Capital ex penditure ex cl. 0.0% 0.0% 3.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% transfers and grants and contributions Safety of Capital Gearing Long Term Borrow ing/ Funds & 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Reserv es Liquidity Current Ratio Current assets/current liabilities – – 0.3 0.8 0.8 0.8 0.4 0.7 0.9 0.9 Current Ratio adjusted for aged debtors Current assets less debtors > 90 – – 0.3 0.8 0.8 0.8 0.4 0.7 0.9 0.9 day s/current liabilities Liquidity Ratio Monetary Assets/Current Liabilities – – 0.1 0.2 0.1 0.1 0.0 0.1 0.2 0.2 Revenue Management Annual Debtors Collection Rate (Pay ment Last 12 Mths Receipts/Last 12 Mths 0.0% 0.0% 78.9% 92.8% 92.0% 92.0% 97.1% 95.0% 95.0% Lev el %) Billing Current Debtors Collection Rate (Cash 0.0% 0.0% 78.9% 92.0% 92.0% 92.0% 97.1% 95.0% 95.0% 95.0% receipts % of Ratepay er & Other rev enue) Outstanding Debtors to Rev enue Total Outstanding Debtors to Annual 0.0% 0.0% 13.8% 14.0% 13.8% 13.8% 21.0% 21.0% 22.7% 20.9% Rev enue Longstanding Debtors Recov ered Debtors > 12 Mths Recov ered/Total 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Debtors > 12 Months Old Creditors Management Creditors Sy stem Efficiency % of Creditors Paid Within Terms 80.0% 85.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% (w ithin`MFMA' s 65(e)) Creditors to Cash and Inv estments 0.0% 0.0% 1592.5% 0.0% 0.0% 0.0% 1370.0% 1030.0% 588.4% 534.2%

Other Indicators Total Volume Losses (kW) 90946311 119135524 119135524 119135524 119135524 119135524 119135524 119135524 119135524 Total Cost of Losses (Rand '000) 73,667 106,031 106,031 106,031 106,031 106,031 106,031 106,031 106,031 Electricity Distribution Losses (2) % Volume (units purchased and generated less units sold)/units purchased and generated 0 0 0 0 0 0 0 0 0 Total Volume Losses (kℓ) 877 1,015 1,015 1,015 1,015 1,015 1,015 1,015 1,015 Total Cost of Losses (Rand '000) 3904177 4731946 4731946 4731946 4731946 4731946 4731946 4731946 4731946 Water Distribution Losses (2) % Volume (units purchased and generated less units sold)/units purchased and generated 0 0 0 0 0 0 0 0 0 Employ ee costs Employ ee costs/(Total Rev enue - capital 0.0% 0.0% 32.0% 31.7% 31.4% 31.4% 32.6% 35.3% 34.9% 34.6% rev enue) Remuneration Total remuneration/(Total Rev enue - 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% capital rev enue) Repairs & Maintenance R&M/(Total Rev enue ex cluding capital 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% rev enue) Finance charges & Depreciation FC&D/(Total Rev enue - capital rev enue) 0.0% 0.0% 23.0% 20.7% 20.6% 20.6% 21.4% 20.6% 20.9% 20.4%

IDP regulation financial viability indicators

i. Debt cov erage (Total Operating Rev enue - Operating – – 30.7 27.3 27.3 27.3 31.9 31.4 30.6 32.7 Grants)/Debt serv ice pay ments due w ithin financial y ear) ii.O/S Serv ice Debtors to Rev enue Total outstanding serv ice debtors/annual 0.0% 0.0% 21.6% 21.6% 21.3% 21.3% 33.1% 29.5% 32.1% 29.8% rev enue receiv ed for serv ices iii. Cost cov erage (Av ailable cash + Inv estments)/monthly – (60.8) 0.5 0.6 0.5 0.5 0.5 0.4 0.6 0.7 fix ed operational ex penditure

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2.3.1 Financial performance indicators and benchmarks

(a) Borrowing management

Capital expenditure in local government can be funded by capital grants, own-source revenue and long term borrowing. The ability of a City to raise long term borrowing is largely dependent on its creditworthiness and financial position. As with all other municipalities, City of Mbombela borrowing strategy is primarily informed by the affordability of debt repayments. The structure of the City’s debt portfolio is dominated by annuity loans. The following financial performance indicators have formed part of the compilation of the 2019/2020 MTREF.

Borrowing to asset ratio is a measure of the long-term borrowing as a percentage of the total asset base of the City. It can be noted that the borrowing asset ratio of City of Mbombela is stable for the medium term.

Capital charges to operating expenditure are a measure of the cost of borrowing in relation to the operating expenditure. It can be seen that the cost of borrowing is zero decreased significantly due to the fact that there’s no borrowing anticipated to fund the 2019/2020 capital expenditure.

In summary, various financial risks could have a negative impact on the future borrowing capacity of the City. In particular, the continued ability of the City to meet its revenue targets and ensure its forecasted cash flow targets are achieved will be critical in meeting the repayments of the debt service costs. As part of the compilation of the 2019/2020 MTREF the potential of smoothing out the debt profile over the longer term will be investigated.

(b) Safety of Capital

The debt-to-equity ratio is a financial ratio indicating the relative proportion of equity and debt used in financing the City’s assets. The indicator is based on the total of loans, creditors, and overfinal and tax provisions as a percentage of funds and reserves.

Current ratio is a measure of the current assets divided by the current liabilities and as a benchmark the City has set a limit of 1, hence at no point in time should this ratio be less than 1. For the 2019/2020 the MTREF the current ratio is 0,8 in the 2019/2020 financial year it will be 0.9 and 0.9 for 2020/2021 and 2021/2022 Going forward it will be necessary to improve these levels or even more.

The liquidity ratio is a measure of the ability of the City to utilize cash and cash equivalents to extinguish or retire its current liabilities immediately. Ideally the City should have the equivalent cash and cash equivalents on hand to meet at least the current liabilities, which should translate into a liquidity ratio of 1. Anything below 1 indicates a shortage in cash to meet creditor obligations. For the 2019/2020 financial year the ratio was 0,2 and as part of the financial planning strategy it will increasing to 0.3 throughout the medium term due to the

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cash flow situation. This needs to be considered a pertinent risk for the City as any under collection of revenue will translate into serious financial challenges for the City. As part of the longer term financial planning objectives this ratio will have to be set at a minimum of 1.

(d) Revenue Management

As part of the financial sustainability strategy, the City will revise its revenue enhancement strategy and theme of the strategy is, “let us make revenue management everyone’s business in the City” we believe that through the aggressive implementation of the strategy framework, the financial stability in the short-term and sustainability in the long-term will be achieved. The intention of the strategy is to streamline the revenue value chain by ensuring accurate billing, customer service, and credit control and debt collection.

(e) Creditors Management

The City will continue to work to ensure that creditors are settled within the legislated 30 days of invoice. While the liquidity ratio is of concern, by applying daily cash flow management the City has managed to ensure a 95 percent compliance rate to this legislative obligation. This will have at least a favourable impact on suppliers’ perceptions of risk of doing business with the City, which is expected to benefit the City in the form of more competitive pricing of tenders, as suppliers compete for the City’s business.

2.3.2 Free Basic Services: basic social services package for indigent households

The social package assists residents that have difficulty paying for services and are registered as indigent households in terms of the Indigent Policy of the City. With the exception of water, only registered indigents qualify for the free basic services.

For the 2019/2020 financial year 11 906 registered indigents will be provided for in the budget. In terms of the City’s indigent policy registered households are entitled to 6kℓ fee water, 50 kwh of electricity, 6 kℓ sanitation and free waste removal equivalent to 85ℓ once a week, as well as a discount on their property rates.

Further detail relating to the number of households receiving free basic services, the cost of free basic services, highest level of free basic services as well as the revenue cost associated with the free basic services is contained in Table A10 (Basic Service Delivery Measurement) .

Note that the number of households in informal areas that receive free services and the cost of these services (e.g. the provision of water through stand pipes, water tankers, etc) are not taken into account in the table noted above.

2.3.3 Providing clean water and managing waste water

The Department of Water Affairs conducts an annual performance rating of water treatment works, presenting a Blue Drop or Green Drop award respectively to potable water treatment works and waste water treatment works that meet certain criteria of excellence.

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Minimum Green Drop certification standards. This has been prioritised as part of the 2019/2020 medium term capital budget.

The following is briefly the main challenges facing the City in this regard:

(a) The infrastructure at most of the waste water treatment works is old and insufficient to treat the increased volumes of waste water to the necessary compliance standard; (b) Shortage of skilled personnel makes proper operations and maintenance difficult; (c) Electrical power supply to some of the plants is often interrupted which hampers the purification processes; and (d) There is a lack of proper regional catchment management, resulting in storm water entering the sewerage system.

The following are some of the steps that have been taken to address these challenges:

(a) Infrastructure shortcomings are being addressed through the capital budget in terms of a 5-year upgrade plan; (b) The filling of vacancies has commenced and the Waste Water Division will embark on an in-house training program, especially for operational personnel; (c) The Electricity Division is to install dedicated power supply lines to the plants; and (d) The Division is working in consultation with the Department of Water Affairs to address catchment management. (e) Updating the infrastructure plan of the City.

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OVERVIEW OF BUDGET RELATED-POLICIES

As required by law, the budgeting process is guided and governed by relevant legislations, framework and policies, all the budget related policies must be reviewed annually. Any amendments, additions or deletions have been tabled to Council on the 31 May 2019 as final policies.

The City has tabled the following Budget Related policies for the financial year 2019/2020;

2.4.1 Virement policy

This is a policy that is developed to manage the shifting of funds within and between departments during a financial year. Its main objective is to give guidance to all relevant stakeholders on how to shift and manage funds within their budgets as per approved delegation of powers.

The Municipal Budget and Reporting Regulations (No 3241), Circular 51 and 89 issued by National Treasury serve as guidelines in the implementation of this policy to enable the tracking and reporting of the shifting of funds.

No proposed Amendments

2.4.2 Budget policy

The budget policy deals mainly with all budget related matters. The objective of the budget policy is to set out the principles which the City will follow in preparing each medium term revenue and expenditure framework budget, to outline the responsibilities of the executive mayor, the accounting officer, the chief financial officer and other senior managers in compiling the budget and to establish and maintain procedures to ensure adherence City of Mbombela’s IDP review and budget processes.

No proposed Amendments

2.4.3 Credit control and debt collection policy and by-laws

The policy is required in terms of chapter 9 of the Municipal Systems Act (MSA) no 32 of 2000 (s 95, 96, 97 and 98). A policy must be developed in order to provide for a mechanism on which credit control and debt collection measures will be effected. The guidelines required by the Act in terms of s 97(1)(a) – (i) is clearly indicated in the policy.

Section 98 of the MSA further requires that Council must adopt by laws to give effect to the policy, its implementation and enforcement.

The objectives of the policy are to;

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(a) Provide a framework within the municipal council can exercise its executive and legislative authority with regard to credit control and debt collection.

(b) Ensure that all monies due and payable to the municipality are collected and used to deliver municipal services in the best interests of the community, residents and ratepayers and in a financially sustainable manner. (c) Outline the procedures that will ensure that the members of the local community is afforded the opportunity to contribute in the decision making processes of the municipality and that they are informed of the decisions and affairs of the municipality.

(d) Outline credit control and debt collection policy procedures and mechanisms.

The following are the proposed Amendments.

Continuation of the 1% Payment Incentive Scheme during the 2019/2020 financial year.

The charging of interest on amount due on accounts be charged immediately after the due date.

Interest rate charged at prime plus 1.

2.4.4 Economic investment and promotion policy

The main objective of the policy is to provide a framework for the uniform development of incentives in City of Mbombela that will assist to:

(a) Attract investment. (b) Return existing investment. (c) Stimulate and create job opportunities. (d) Support investment into IDP projects.

As per deliberations, it was agreed that proper enforcement of this policy will have positive and beneficial impact to the City. The proposed types of incentives were also look at it was then agreed that a phase in approach as per the provisions Municipal Property Rates Act No 6 of 2004. These provisions are outlined in the City of Mbombela Property Rates by Law in terms of section 9.4.1(b).

2.4.5 Investment policy

This policy gives effect to the requirements as set out on s 13(2) of the Municipal Finance Management Act no 56 of 2003 and the Municipal Investment Regulations (Gazette 2743) of April 2005. All investment related practices are guided by the implementation of this policy. It clearly outlines the roles and responsibilities of all role players in the management of the cash resources, deliberations will be during the workshop proposal for amendments will form part of the final budget.

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No Proposed Amendments.

2.4.6 Funding and reserves policy

The policy is required in terms of Section 8 of the Local Government: Municipal Budget and Reporting Regulations which is in accordance with Section 17 and 168 of the Municipal Finance Management Act No. 56 of 2003.

The policy sets out the assumptions and methodology for estimating the following:

(a) Projected billings, collections and all direct revenues. (b) Provision for revenue that will not be collected. (c) Funds that the municipality can expect from investments. (d) Proceeds the municipality can expect to receive from the transfer or disposal of assets. (e) Council‘s borrowing requirements. (f) Funds to be set aside in reserves.

No Proposed Amendments.

2.4.7 Indigent policy

The Department of Cooperative Governance and Traditional Authorities has issued a guideline on formulation of Indigent Policy. This guideline has been used in developing the Indigent Policy for City of Mbombela the policy was rationalized to accommodate former Umjindi and approved for implementation in terms item A(2) of 28 February 2017.

The objectives of the policy will be to ensure the following:

(a) The provision of basic services to the community in a sustainable manner within the financial and administrative capacity of Council; (b) The financial sustainability of free basic services through the determination of appropriate tariffs that contribute to such sustainability through cross subsidisation (c) Establishment of a framework for the identification and management of indigent households including a socio –economic analysis and indigent exit strategy; (d) The provision of procedures and guidelines for the subsidisation of basic charges and the provision of free basic energy to indigent households (e) To enhance the institutional and financial capacity of the municipality to implement the policy No Proposed Amendments.

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2.4.8 Subsistence and Travelling policy

The policy has been developed in terms of the Basic Conditions of Employment Act No 75 of 1997 Section 34(5)(a).

No Proposed Amendments.

2.4.9 Supply chain management policy The following amendments have been proposed on the Supply Chain Management policy. These are due to the continuous reforms and guidelines issued by National Treasury.

Section 5 of the policy

Section 5 deals with the system of delegated powers. The clause is amended to enhance the effectiveness of the policy. Sub-section 5, 6 and 7 were added to ensure that the Municipal Manager reviews the systems of delegated powers periodically and tighten controls regarding powers conferred on incumbents in acting responsibilities. The main objective of this section is to ensure that there are no bottlenecks in the implementation of the Supply Chain Management policy whilst addressing the risks of having the municipality incurring irregular expenditure.

Section 10 of the policy

Section 10 deals mainly with the System of Demand Management. Section 10(a) was amended to compel the Accounting Officer to ensure that Demand Management plans are approved prior to the start of the new financial year. This clause will ensure that the Supply Chain Management Unit facilitates the implementation of projects timely.

Section 20 of the policy

Section 20 of the policy deals with the competitive bidding processes. Section 20 (g) was amended to include the guidelines of MFMA circular number 62 issued by National Treasury. The amendments will compel the Accounting Officer to implement processes and procedures to ensure compliance with the guidelines issued by the National Treasury.

The amendments will ensure that proper monitoring procedures are implemented to ensure sound contract and project manager to ensure effective planning and value of money. Contracts awarded in line with supply chain management policy can only be varied or amended to a specific threshold.

Section 31 of the policy

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Section 31 of the policy deals with the procurement of Banking Services. Section 31(4)(5) were included. The amendments of these sections to the policy will ensure a clear distinction between contracts that have budgetary implications beyond the municipal’s Medium Term Revenue and Expenditure Framework (MTREF) period.

This policy will in future exclude the procurement of banking services from the requirements of MFMA section 33. The reason for the exclusion is based on the fact that although the duration of banking services is regulated by the SCM regulations to be beyond the MTREF, banking service is rates based and not imposing financial obligations to the municipality beyond the period stipulated in section 33 of the MFMA.

Section 33 of the policy

Section 33 of the policy deals mainly with the procurement of goods and services under contracts secured by other organs of state. Section 33 (2)(5) have been added. The main objectives of the added section is to enhance and Supply Chain Management processes. This policy will in future compel the accounting Officer to subject all regulation 32 contracts to the bid Adjudication Committee for recommendations.

Section 36 of the policy

Section 36 of the policy deals with the appointment of consultants. This Policy will in future compels the Accounting Officer to consider internal mechanisms prior to the implementation of outsourced mechanisms. The amendments will ensure that value for money is achieved and form part of cost curtailment currently implemented by the municipality.

Section 40 of the policy

Section 40 deals mainly with the logistic management of the Supply Chain. Section 40 (4)(5)(6) was added into this policy. The amendments will enhance controls in the municipal stores and ensure than the municipal stores only keep stock that is necessary for service delivery. The proper implementation of the amendments will ensure that the municipality reduces the costs of storing materials and improve the cash flow of the municipality.

2.4.11 Contract management policy

This policy is linked to the supplier performance monitoring policy. It has been developed in terms of section 116(2) of the MFMA. The lack of proper contract management or consistent application of contract management necessitated the development of this policy

A dedicated unit in the SCM sub directorate with the assistance of the Legal Services within Council will be the key custodians of the policy. The Project Managers and user departments

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will in terms of the policy be accountable for the specific project whilst it is underway and will work closely with the Contract Management unit to ensure compliance to the policy.

2.4.12 Property rates policy and by law

The City has compiled a General Valuation roll which serves as a basis for the implementation of the Municipal Property Rates Act. This has necessitated the City to propose amendments to the property rates policy for 2019/2020 financial year as follows;

A general rate (cent amount in a rand) would be increase by 6 percent for the 2019/2020 financial year.

A 30 percent general rebate on the cent amount in the rand will be applied across the board (on all property rates categories), this is in line with the definition of a rate ratio in terms of the Municipal Property Rates Act.

The above rebate of 30 percent was previously only applicable to the residential property category during the 2018/2019 financial year.

The implications for the application of the 30 percent as mentioned above are as follows:

(i) The agricultural property owners will need not to apply for additional (conditional) rebates anymore; (ii) The business and commercial property general rebate of 28 percent will no longer apply.

The proposed changes are as follows;

CATEGORY RATIO TARIFF

Residential Property 1 : 1 0.00692

Industrial Property 1 : 2.25 0.01557

Business and Commercial/ 1 : 2.25 0.01557

Agricultural Property 1 : 0.25 0.00173

Municipal Property 1 : 0 0.00000

1 : 3 0.02076

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State/ Government Owned Property and used for Public Service Purposes

Public Service Infrastructure 1 : 0.25 0.00173

Public Benefit Organization Owned Property 1 : 0.25 0.00173 and Used for Specified Public Benefit Activities

Mining 1 : 2.25 0.01557

Places of Public Worship 1 : 0 0.00000

Protected Areas 1 : 0 0.00000

Other property 1 : 1.5 0.01038

Multiple Use Property As per apportionment of N/A the market value of the property according to

the different uses.

2.4.13 Tariff policy and by law

Section 74 of the Municipal Systems Act no 32 of 2000, provides a framework on the formulation of a tariff policy. This policy together with the by law adopted in terms of Section 75 are part of the budget related policies that must be reviewed annually.

The objective of the tariff policy is to ensure that:

(a) The tariffs approved during the Budget process by council to fund services must be consistent with this policy. (b) The municipal services are financially sustainable, affordable and equitable. (c) The needs of the poor households are taken into consideration. (d) There is consistency in how tariffs are applied throughout the municipality

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The Proposed Amendments as follows;

Tariff for private contractors dumping on the municipal landfill site who provide services within the area where the municipality is providing the waste removal service be developed and incorporated into the tariff schedule.

2.4.14 Asset management policy

The safeguarding and maintenance of assets, valuation in accordance with GRAP, maintaining a system of internal control and keeping an asset register are key elements of the Asset Management Framework. In order to ensure above is done in a consistent and legally compliant manner, a policy directive needs to be adopted. The Asset Management Policy provides direction for the management, accounting and control of Fixed Assets owned or controlled by the Council

Proposed Amendments are under the disposal of assets as follows;

User departments are responsible for the strategic planning for the disposal of assets that cause the municipality not to perform service delivery efficiently and effectively.

Planning for disposals must be conducted by the User departments on an annual basis and revised on quarterly basis, and must be submitted to the asset management unit for consolidation.

Asset Management unit must submit the consolidated listing of assets earmarked for disposal to the Disposal Committee for final recommendation.

The planning should involve a detailed assessment of assets identified as surplus, redundant or obsolete.

Assessing disposals

The Disposal Committee is responsible for assessing the list of assets earmarked for disposals prepared by the asset management section. The Disposal Committee shall also consider the following factors:

(i) Whether there are net disposal benefits, either in financial or other forms. (ii) Whether there is secondary service obligations associated with the asset which dictates its retention. (iii) Whether a disposal can be carried out without adverse impacts on the physical environment.

In assessing the benefits of disposal, the advantages and disadvantages for the entire municipality, not just the user department, must be considered.

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Disposals need not always be for a financial gain. Other opportunities and gains should also be taken into consideration, for example;

(i) Swapping one asset for another (ii) Construction of a facility for the municipality in return for the asset.

Disposal Committee shall be responsible for advising the Municipal Manager and Council on the disposal and writing off of assets after;

(i) Deciding on reasonable grounds that the asset is not needed to provide the minimum level of basic municipal services; and (ii) Consideration of the fair market value of the asset and the economic and community value to be received in exchange for the asset.

Section 9.4 of the policy: Method of disposal

Disposal of an asset should be performed in a manner which satisfies the following objectives

(i) The disposal should take place on an equitable basis. There should be an equal opportunity for all, to purchase the asset.

(ii) The best possible return for the municipality must be achieved.

(iii) Any adverse environmental impacts should be avoided.

The disposal committee should document the basis of the decision taken to dispose off, an asset and clear basis of the method of disposal decided upon.

Section 9.5 of the policy: Disposal management

(1) The system of disposal management for the disposal or alienation of assets, including unserviceable, redundant or obsolete assets, subject to sections 14 and 90 of the Act, is as follows:

(2) The disposal or alienation of assets must:

(a) Be through one of the following methods:

(i) transferring the asset to another organ of state in terms of a provisions for the transfer of assets; (ii) transferring the asset to another organ of state at market related value or, when appropriate, free of charge; (iii) the alienation of the asset; or (iv) destroying the asset, after taking into account re-cycling; 2019/2020 – 2021/2022 Approved Final Budget and Medium Term Revenue and Expenditure Framework Page 109

(b) Provided that:

(i) immovable property may be sold only through a competitive bidding process except when the public interest or the plight of the poor demands otherwise and the disposal committee has unanimously agreed on an alternative method, in such a case reasons of different method must be recorded; (ii) movable assets may be sold either by way of written price quotations, a competitive bidding process, auction or at market related prices, whichever is the most advantageous; (iii) in the case of the free disposal of computer equipment, the provincial department of education must first be approached to indicate within 30 days whether any of the local schools are interested in the equipment;

(c) Furthermore ensure that immovable property is alienated at market related values, except when the public interest or plight of the poor demands otherwise; and or Non-current asset held for sale will be deleted in line with the updated Generally Recognised Accounting Practice Standard 100.

2.4.15 Insurance policy

The main objective of the insurance policy is to:

(a) Create awareness to all employees of the risks associated with all insurable interests (b) Ensure reasonable steps are taken to mitigate and minimise all risks (c) Identify all potential risks and enforce risk control measures (d) Minimise losses by ensuring proper management control housekeeping and maintenance of assets.

No Proposed Amendments

2.4.16 Deposit and refunds policy

The policy deals with issues of consumer deposits and refunds has been developed.

The refunds include monies paid into the municipal bank account which must be for acceptable reasons be refunded.

No Proposed Amendments

2.4.17 Proof of residence policy

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The policy will guide the operations in the issue of “Proof of Residence” has been developed. This policy will be applicable for formalised and non-formalised areas within the jurisdiction of City of Mbombela.

No Proposed Amendments

2.4.18 Liquidity Policy

The objective of the policy is to ensure liquidity management in so far as maintaining sufficient liquidity intensities to meet the liabilities when due under both normal and stressed conditions without incurring any prohibited expenditure.

No Proposed Amendments 2.4.19 Recruitment, Selection and Induction Policy No Proposed Amendments 2.4.20 Overtime Policy No Proposed Amendments 2.4.21 Supplier Performance Policy No Proposed Amendments 2.4.22 Payroll Policy No Proposed Amendments 2.4.23 Fleet Management Policy No Proposed Amendments

2.5 OVERVIEW OF BUDGET ASSUMPTIONS

2.5.1 External factors

Unemployment remains very high at 26,7 percent and escalating according to the latest unemployment statistics released by Statistics South Africa. Economic Growth has remained stagnant at less than 2 percent.

The forecasted headline inflation for medium-term will be as follows; 2019/2020 - 2021/2122 MEDIUM TERM REVENUE AND EXPENDITURE ASSUMPTIONS

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2.5.3 Interest rates for borrowing and investment of funds

The MFMA specifies that borrowing can only be utilised to fund capital or refinancing of borrowing in certain conditions. The City engages in a number of financing arrangements to minimise its interest rate costs and risk. However, for simplicity the 2019/2020 MTREF no borrowings will be sourced.

2.5.4 Collection rate for revenue services

The estimated payment level trends for the current financial year and the forecast for the next medium-term is as follows; The City is projecting 95 percent payment rate for the medium term and a provision of 5 per cent is project for debt impairment.

2.5.5 Growth or decline in tax base of the City

Despite the global economy weaknesses and projected to be likely to remain so for at least a few more year, the South African economic growth outlook in 2019 to 2023 is expected to be as follows;

Headline inflation forecast over the medium-term;

Prime Lending Rate (Interest Rate) 10.25% 10.25% 10.25% 10.25% 10.25% 10.25% 10.25% Repo Lending Rate 6.75% 6.75% 6.75% 6.75% 6.75% 6.75% 6.75%

2.5.6 Salary increases

The employee’s remuneration cost will amount to R1 010 billion in 2019/2020 financial year and in accordance with existing salary agreement signed between the employer and labour. Remuneration of councilor’s budget amount to R44 million in 2019/2020 financial year. The

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total remuneration cost to the total operating expenditure budget is 32 percent including the remuneration for councilors.

2.5.7 Micro or internal environment perspective

Furthermore from macro environment perspective and the unfavourable economic conditions more of our people are unemployed which result in shrinking of the current revenue base, putting pressure on the current municipal revenue and cash flow over the medium-term over the slow economic growth trends reflect that a convergence of unfavourable global and domestic circumstances of which impact negatively on all spheres of government. The revenue base of the City is under pressure as no new revenues are derived at the moment due to the slow economic growth and local circumstances.

As a consequence of the distress economy, the City was advised by National Treasury to adopt a conservative approach when projecting the revenue and cash flow for the medium term due to unfavorable and unstable economic conditions and rising inflationary pressures, and the slow growth pace on global and national economy.

On the expenditure side - careful analysis and evaluation of the current spending patterns need to be conducted so that the allocation of funds in the next medium-term is in line with the key municipal priorities and non-priority spending is eliminated (austerity measures need to be implemented).

2.5.8 Impact of national, provincial and local policies

Integration of service delivery between national, provincial and local government is critical to ensure focussed service delivery and in this regard various measures were implemented to align IDPs, provincial and national strategies around priority spatial interventions. In this regard, the following national priorities form the basis of all integration initiatives:

(a) Accelerate economic growth and Job creation; (b) Enhancing education system and skill development; (c) Improving Health services; (d) Rural development and agriculture; and (e) Fighting crime and corruption.

To achieve this national priority, municipalities are urged when finalising 2019/2020 budgets to continue explore opportunities to promote labour intensive approaches to delivering services, and more particularly to participate fully in the EPWP.

However, municipalities should not carelessly employ more people without any reference and consideration to the level of staffing required delivering effective services. Municipalities should focus on maximizing its contribution to job creation by;

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i. Ensuring that service delivery and capital project use labour intensive methods wherever appropriate. ii. Ensuring that service providers use labour intensive approaches. iii. Supporting labour intensive Local Economic Development projects. iv. Participating fully in the Expanded Public Works Programmes/National youth service plan. v. Implementing interns programs to provide young people with on-the-job training.

OVERVIEW OF BUDGET FUNDING

2.5.7 Medium-term outlook: operating revenue

The following graph is a breakdown of the operational revenue per revenue source for the 2019/2020 financial year;

Tariff-setting is a pivotal and strategic part of the compilation of any budget. When rates, tariffs and other charges were revised, wage agreements with unions (Labour), input costs of services provided by the City, local economic conditions and the affordability of services taking into consideration the City’s indigent policy were taken into consideration.

The percentage increases of both Eskom and SembCorp (Silulumanzi) Water bulk tariffs are far beyond the mentioned inflation target. Given that these tariff increases are determined by external agencies, the impact they have on the City’s electricity and in these tariffs are largely

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outside the control of the City. Discounting the impact of these price increases in lower consumer tariffs will erode the City’s future financial position and viability.

The current challenge facing the City is managing the gap between cost drivers and tariffs levied, as any shortfall must be made up by either operational efficiency gains or service level reductions.

The revenue strategy is a function of key components such as:

(a) Growth in the city and economic development; (b) Revenue management and enhancement; (c) Achievement of a 95 percent annual collection rate on revenue from rates and services charge; (d) National Treasury guidelines; (e) Electricity tariff increases within the National Electricity Regulator of South Africa (NERSA) approval; (f) Achievement of full cost recovery of specific user charges; (g) Determining tariff escalation rate by establishing/calculating revenue requirements; (h) The Property Rates Policy in terms of the Municipal Property Rates Act, 2004 (Act 6 of 2004) (MPRA), and (i) And the ability to extend new services and obtain cost recovery levels.

The above principles guide the annual increase in the tariffs charged to the consumers and the ratepayers aligned to the economic forecasts.

The proposed tariff increases for the 2019/2020 MTREF on the different revenue categories are; Rates and Services Charges Tariffs Increase %: 2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 Property Rates 6.40% 0.00% 6.00% 5.40% 5.40% 5.40% 5.40% Electricity 2.12% 7.82% 13.07% 5.40% 5.40% 5.40% 5.40% Water 7.78% 6.44% 5.90% 5.40% 5.40% 5.40% 5.40% Refuse Removal 7.78% 6.44% 5.90% 5.40% 5.40% 5.40% 5.40% Sewerage 7.78% 6.44% 5.90% 5.40% 5.40% 5.40% 5.40% Concession Area - Water and Sanitation 13.32% 7.43% 12.00% 12.00% 12.00% 12.00% 12.00% Average Increase - Non-Concession Area 6.37% 5.43% 7.35% 5.40% 5.40% 5.40% 5.40% Average Increase - Concession Area 7.40% 5.42% 9.24% 7.05% 7.05% 7.05% 7.05%

Sundry charges tariffs and fees 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 2019/2020 – 2021/2022 Approved Final Budget and Medium Term Revenue and Expenditure Framework Page 115

2.5.8 Funding compliance measurement

National Treasury requires that the City assess its financial sustainability against fourteen different measures that look at various aspects of the financial health of the City. These measures are contained in the following table. All the information comes directly from the annual budgeted statements of financial performance, financial position and cash flows. The funding compliance measurement table essentially measures the degree to which the proposed budget complies with the funding requirements of the MFMA. Each of the measures is discussed below.

2.6.4 Funding Compliance measures

The cash and cash equivalents as reflected on table A7 indicates that the City will have a positive cash balance at the end of the financial year which is an indication of the minimum requirement as required by MFMA. The forecasted cash and cash equivalents for the Medium Term period is R87 million, R140 million and R165 million for each year respectively.

2.6.5 Cash and cash equivalent position

The City’s forecast cash position was discussed as part of the budgeted cash flow statement. A “positive’’ cash position, for each year of the MTREF would generally be a minimum requirement, subject to the planned application of these funds such as cash- backing of reserves and working capital requirements.

If the City’s forecast cash position is negative, for any year of the medium term budget, the budget is very unlikely to meet MFMA requirements or be sustainable and could indicate a risk of non-compliance with section 45 of the MFMA which deals with the repayment of short term debt at the end of the financial year. The forecasted cash and cash equivalents for the 2019/2020 MTREF shows R87 million, R140 million and R165 million for each respective financial year.

2.6.6 Cash plus investments less application of funds

The purpose of this measure is to understand how the City has applied the available cash and investments as identified in the budgeted cash flow statement. The detail reconciliation of the cash backed reserves/surpluses is contained in Table A8. The reconciliation is intended to be a relatively simple methodology for understanding the budgeted amount of cash and investments available with any planned or required applications to be made. This has been extensively discussed above.

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2.6.7 Monthly average payments covered by cash or cash equivalents

The purpose of this measure is to understand the level of financial risk should the City be under financial setbacks/risk from a collection and cash in-flow perspective. Regardless of the annual cash position an evaluation should be made of the ability of the City to meet monthly payments as and when they fall due. It is especially important to consider the position should the City be faced with an unexpected disaster that threatens revenue collection such as rate boycotts municipalities improving cash position causes the ratio to move upwards one month’s cash coverage in the medium term, and then gradually move towards two months coverage. This measure will have to be carefully monitored going forward. For the 2018/2019 MTREF the indicative outcome shows that the City will be able to have cash for 0,6 months, 0,8 months in 2019/2020and increasing to 0,8 months in 2020/2021..

2.6.8 Surplus/deficit excluding depreciation offsets

The main purpose of this measure is to understand if the revenue levels are sufficient to conclude that the community is making a sufficient contribution for the City’s resources consumed each year. An ‘adjusted’ surplus/deficit is achieved by offsetting the amount of depreciation related to externally funded assets. Municipalities need to assess the result of this calculation taking into consideration its own circumstances and levels of backlogs. If the outcome is a deficit, it may indicate that rates and service charges are insufficient to ensure that the community is making a sufficient contribution toward the economic benefits they are consuming over the medium term. For 2019/2020 MTREF the indicative outcome is a surplus of R197 million, R323 million and R467 million.

It needs to be noted that a surplus does not necessarily mean that the budget is funded from a cash flow perspective and the first two measures in the table are therefore critical.

2.6.9 Property Rates/service charge revenue as a percentage increase less macro inflation target

The purpose of this measure is to understand whether the City is contributing appropriately to the achievement of national inflation targets. This measure is based on the increase in ‘revenue’, which will include both the change in the tariff as well as any assumption about real growth such as new property development, services consumption growth etc.

2.6.10 Cash receipts as a percentage of ratepayer and other revenue

This factor is a macro measure of the rate at which funds are ‘collected’. This measure is intended to analyze the underlying assumed collection rate for the MTREF to determine the relevance and credibility of the budget assumptions contained in the budget. It can be seen that the outcome is at 95 per cent, 95. Percent and 95, percent for each of the respective financial years. Given that the assumed collection rate is based on a 95 percent performance target, the cash flow statement has been conservatively determined.

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2.6.11 Debt impairment expense as a percentage of billable revenue

This factor measures whether the provision for debt impairment is being adequately funded and is based on the underlying assumption that the provision for debt impairment (doubtful and bad debts) has to be increased to offset under-collection of billed revenues. The provision has been appropriated at 5 percent in 2019/2020 decreased to 5 percent in 2020/2021 and 5 percent in 2021/2022.

2.6.12 Capital payments percentage of capital expenditure

The purpose of this measure is to determine whether the timing of payments has been taken into consideration when forecasting the cash position. The City aims to keep this as low as possible through strict compliance with the legislative requirement that debtors be paid within 30 days.

2.6.13 Borrowing as a percentage of capital expenditure (excluding transfers, grants and contributions)

The purpose of this measurement is to determine the proportion of a City’s ‘own-funded’ capital expenditure budget that is being funded from borrowed funds to confirm MFMA compliance. Externally funded expenditure (by transfers/grants and contributions) has been be excluded. It can be seen that no borrowing planned for the medium term.

2.6.14 Transfers/grants revenue as a percentage of Government transfers/grants available

The purpose of this measurement is mainly to ensure that all available transfers from national and provincial government have been budgeted for. A percentage less than 100 per cent could indicate that not all grants as contained in the Division of Revenue Act (DoRA) have been budgeted for. The City has budgeted for all transfers.

2.6.15 Consumer debtors change (Current and Non-current)

The purpose of these measures is to ascertain whether budgeted reductions in outstanding debtors are realistic. There are two measures shown for this factor; the change in current debtors and the change in long term receivables, both from the Budgeted Financial Position. Both measures show a relatively stable trend in line with the City’s policy of settling debtors’ accounts within 30 days.

2.6.16 Repairs and maintenance expenditure level

This measure must be considered important within the context of the funding measures criteria because of a trend that indicates insufficient funds are being committed to asset

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repair could also indicate that the overall budget is not credible and/or sustainable in the medium to long term because the revenue budget is not being protected, for 2019/2020 repairs and maintenance showing a per cent of 4,1 percent and increasing to 4,4 percent in 2020/2021 and 4,6 in 2021/2022.

2.6.17 Asset renewal/rehabilitation expenditure level

This measure has a similar objective to aforementioned objective relating to repairs and maintenance. A requirement of the detailed capital budget (since MFMA Circular 28 which was issued in December 2005) is to categorize each capital project as a new asset or a renewal/rehabilitation project. The objective is to summarize and understand the proportion of budgets being provided for new assets and also asset sustainability. A declining or low level of renewal funding may indicate that a budget is not credible and/or sustainable and future revenue is not being protected, similar to the justification for ‘repairs and maintenance’ budgets.

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2.6 BUDGET SUPPORTING TABLES

The 2019/2020 final budget supporting tables are enlisted below; MP326 City of Mbombela - Supporting Table SA1 Supportinging detail to 'Budgeted Financial Performance' 2019/20 Medium Term Revenue & 2015/16 2016/17 2017/18 Current Year 2018/19 Expenditure Framework Description Ref Audited Audited Audited Original Adjusted Full Year Budget Year Budget Year Budget Year Outcome Outcome Outcome Budget Budget Forecast 2019/20 +1 2020/21 +2 2021/22 R thousand REVENUE ITEMS: Property rates 6 Total Property Rates 557,692 686,311 822,794 826,794 826,794 705,495 743,591 783,745 less Revenue Foregone (exemptions, reductions and rebates and impermissable values in excess of section 17 of MPRA) – 187,560 220,176 220,263 220,263 220,263 63,135 66,544 70,138 Net Property Rates – 370,133 466,134 602,531 606,531 606,531 642,360 677,047 713,608

Service charges - electricity revenue 6 Total Serv ice charges - electricity rev enue 835,776 872,359 1,029,960 1,049,960 1,049,960 1,166,129 1,254,549 1,343,904 less Revenue Foregone (in excess of 50 kwh per indigent household per month) 48,600 40,068 40,068 40,068 42,071 44,175 46,384 less Cost of Free Basis Services (50 kwh per indigent household per month) – 5,850 52 45,041 45,041 45,041 47,293 49,657 52,140 Net Service charges - electricity revenue – 781,326 872,307 944,852 964,852 964,852 1,076,765 1,160,716 1,245,381

Service charges - water revenue 6 Total Serv ice charges - w ater rev enue 113,157 94,756 163,219 166,219 166,219 180,226 192,500 205,773 less Revenue Foregone (in excess of 6 kilolitres per indigent household per month) 22,910 19,153 19,153 19,153 20,110 21,116 22,172 less Cost of Free Basis Services (6 kilolitres per indigent household per month) – 9,126 6,101 46,309 46,309 46,309 48,624 51,056 53,608 Net Service charges - water revenue – 81,121 88,654 97,758 100,758 100,758 111,491 120,328 129,993

Service charges - sanitation revenue Total Serv ice charges - sanitation rev enue 59,974 65,085 71,781 69,781 69,781 66,188 70,451 75,014 less Revenue Foregone (in excess of free sanitation service to indigent households) 27,865 28,738 28,738 28,738 28,738 30,175 31,683 33,268 less Cost of Free Basis Services (free sanitation service to indigent households) – 9,126 9,126 14,369 14,369 14,369 12,187 13,053 13,966 Net Service charges - sanitation revenue – 22,984 27,222 28,675 26,675 26,675 23,826 25,714 27,780

Service charges - refuse revenue 6 Total refuse remov al rev enue – 96,376 113,839 121,251 126,251 126,251 145,266 156,350 168,440 Total landfill rev enue less Revenue Foregone (in excess of one removal a week to indigent households) less Cost of Free Basis Services (removed once a week to indigent households) – 13,112 13,112 14,009 14,009 14,009 14,710 15,445 16,218 Net Service charges - refuse revenue – 83,264 100,727 107,241 112,241 112,241 130,556 140,905 152,222 Other Revenue by source Fuel Levy Sale Of Goods & Services – – 18,346 6,656 21,656 21,656 29,321 32,626 35,479 Other Revenue – – – – – – – – – Other Revenue – 32,541 18,374 21,919 26,919 26,919 24,111 26,522 29,977 Total 'Other' Revenue 1 – 32,541 36,720 28,575 48,575 48,575 53,433 59,149 65,456

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EXPENDITURE ITEMS: Employee related costs Basic Salaries and Wages 2 – 377,703 427,258 506,214 509,202 509,202 599,543 636,851 679,202 Pension and UIF Contributions – 71,267 87,843 104,845 104,847 104,847 112,920 120,430 128,438 Medical Aid Contributions – 31,859 37,920 47,923 47,923 47,923 51,613 55,046 58,706 Ov ertime – 84,547 92,155 102,654 102,664 102,664 110,569 117,922 125,763 Performance Bonus – – 34,328 27,689 27,689 27,689 29,821 31,804 33,919 Motor Vehicle Allow ance – 31,819 43,011 53,761 53,761 53,761 57,900 61,751 65,857 Cellphone Allow ance – 3,460 4,807 5,939 5,939 5,939 6,397 6,822 7,276 Housing Allow ances – 3,246 3,331 4,044 4,044 4,044 4,355 4,645 4,954 Other benefits and allow ances – 19,053 28,334 34,693 34,693 34,693 37,364 39,849 42,499 Pay ments in lieu of leav e – 6,752 6,251 – – – – – – Long serv ice aw ards 9,625 Post-retirement benefit obligations 4 – (62,992) 28,469 – – – – – – sub-total 5 – 576,338 793,706 887,762 890,762 890,762 1,010,483 1,075,118 1,146,614 Less: Employees costs capitalised to PPE Total Employee related costs 1 – 576,338 793,706 887,762 890,762 890,762 1,010,483 1,075,118 1,146,614 Contributions recognised - capital Transfers And Subsidies - Capital (Monetary Allocations) (National / Provincial – Departmental Agencies, – Households, 3,242 Non-Profit – Institutions, Private – Enterprises, – Public Corporatons, – Higher –Educational Institutions) – Total Contributions recognised - capital – – 3,242 – – – – – – Depreciation & asset impairment Depreciation of Property , Plant & Equipment – 455,223 501,707 539,598 539,598 539,598 545,585 595,964 625,762 Lease amortisation – – 1,167 958 958 958 – – – Capital asset impairment Depreciation resulting from rev aluation of PPE 10 Total Depreciation & asset impairment 1 – 455,223 502,874 540,557 540,557 540,557 545,585 595,964 625,762 Bulk purchases Electricity Bulk Purchases – 560,628 666,786 686,220 667,869 667,869 792,241 855,620 924,070 Water Bulk Purchases – 46,107 40,026 49,968 42,968 42,968 47,221 50,669 54,317 Total bulk purchases 1 – 606,735 706,812 736,187 710,837 710,837 839,462 906,289 978,386

Transfers and grants Cash transfers and grants – 39,271 30,189 32,688 26,250 26,250 27,159 29,308 31,504 Non-cash transfers and grants – – 1,723 2,622 3,964 3,964 3,661 3,700 3,814 Total transfers and grants 1 – 39,271 31,912 35,310 30,214 30,214 30,820 33,008 35,318 Contracted services Contractors – – 179,051 171,140 166,992 166,992 169,943 146,082 133,294 Outsourced Services – 616,133 206,175 168,467 203,924 203,924 154,660 147,861 144,825 Consultants & Professionals – – 133,628 134,155 148,194 148,194 84,070 70,557 64,731 sub-total 1 – 616,133 518,854 473,762 519,111 519,111 408,674 364,500 342,850 Allocations to organs of state: Electricity Water Sanitation Other Total contracted services – 616,133 518,854 473,762 519,111 519,111 408,674 364,500 342,850 Other Expenditure By Type Collection costs Contributions to 'other' prov isions Consultant fees Audit fees – – 6,144 5,800 5,260 5,260 4,471 4,024 3,622 General ex penses 3 – 300,379 233,905 179,559 170,068 170,068 159,704 143,014 128,712 License Agency Fees – – – 70,377 66,469 66,469 – – – Total 'Other' Expenditure 1 – 300,379 240,049 255,735 241,796 241,796 164,175 147,038 132,334

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